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 First Quarter 2024 Conference Call. I'll now hand the call over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, Chairman and Chief Executive Officer; and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the 3 months ended March 31, 2024. 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-Q, which we filed with the SEC earlier this afternoon 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 or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, May 7, 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 first quarter of 2024. We always start our earnings call by reiterating our commitment to delivering strong and consistent patient outcomes. Our mission is to put the patient first, and we are thrilled that over 65,000 patients have been treated with Inspire therapy to date. Last week, we celebrated a major milestone with the 10-year anniversary of the FDA approving Inspire therapy. This is only the beginning. And in the years ahead, we look forward to advancing the technology and growing therapy adoption for the many patients with untreated obstructive sleep apnea. With that, let's review our results. In the first quarter, we generated revenue of $164 million, representing a 28% increase compared to the first quarter of 2023. First quarter U.S. revenue totaled $155.8 million, a 25% increase over the same period last year. This revenue growth reflects increased physician and patient awareness, increased market penetration in existing centers as well as expansion into 66 new implanting centers in the United States and 11 new U.S. sales territories. Outside the U.S., revenue increased 141% to $8.2 million. We're very happy to report a strong rebound in Europe and primarily in Germany, since receiving derogation late in the fourth quarter. The derogation process has allowed us to continue to grow the adoption of Inspire therapy. Finally, we continue to work diligently to obtain EU MDR approval, which we expect to receive in mid-2024. On our last earnings call, we indicated more pronounced seasonality of mid- to high teens in the first quarter, and the team worked diligently and delivered revenue growth within the expected range, while holding seasonality to 15%. With this strong start and our outlook for the remainder of the year, we are increasing our 2024 revenue guidance to $783 million to $793 million which represents a 25% to 27% growth over 2023 revenue of $624.8 million. Our net loss for the first quarter was $10 million compared to the $15.4 million in the prior year period, representing a net loss per share of $0.34, compared to $0.53 in the first quarter of 2023. As our business continues to mature, we expect further operating leverage and now expect to be profitable for the full year 2024. Therefore, we are initiating first-time diluted net income per share guidance of $0.10 to $0.20 for the full year 2024. Switching our discussion to a few key market developments. First, the SURMOUNT-OSA trial results reinforce our view that GLP-1s will be complementary to our market opportunity and may provide a mechanism for potential patients to reduce their weight and qualify for Inspire therapy. As a baseline, Inspire therapy is currently designed to treat tongue-based collapse with stimulation of the hypoglossal nerve. Patients with a higher BMI are more likely to experience lateral wall collapse of the airway which is not effectively treated with hypoglossal nerve stimulation. If they experience lateral wall collapse, these higher BMI patients, such as the patients in the SURMOUNT-OSA trial, who had a mean BMI of 39 generally would not qualify for Inspire therapy. Therefore, with the headline results of the SURMOUNT-OSA trial, we believe many of the patients who experienced significant weight loss, including those who benefit from the use of GLP-1 are likely to experience a reduction in their lateral wall collapse, which would allow them to qualify for Inspire. We look forward to reviewing the detailed study results when they become available. On a related note, regarding the sleep endoscopy procedure used to identify candidates for Inspire therapy, we have finished the enrollment and quality assurance phase of the predictor study designed to discover a new method to replace sleep endoscopy for certain patients. We are in the early stages of data analysis and are identifying populations with primarily tongue-based obstructions. Consistent with earlier Inspire results, our initial focus for the predictor study is on patients with a lower BMI who may not experience significant lateral wall collapse and therefore might not need sleep endoscopy. We will continue our analysis and aim for a peer-reviewed publication, which will help us collaborate with payers to revise their policies. In terms of our research and development efforts, we are pleased to announce that the Inspire V submission is currently under review with the FDA, and if approved, we are set for a soft launch in 2024 followed by a full launch in 2025. Our team is concentrating on operational readiness, which includes making sure we have adequate inventory levels before the full launch. Further, we continue to make enhancements to our technology as evidenced by the commercial launches of our silicon-based leads and Bluetooth patient remote, the ongoing investments in our SleepSync digital platform and most recently, the FDA approval of our new physician programmer, which connects directly with the SleepSync platform. Highlighting our market development activities, we continue to advance our medical education programs. And year-to-date, we had over 100 sleep doubles and close to 200 E&T residents attend our Inspire training programs. Further, we continue to increase our presence at primary care and cardiology conferences to drive increased awareness of Inspire therapy. Our direct-to-consumer awareness programs continue to be excellent and provide a strong pathway for patients to connect with the proper healthcare providers. Key to our access is our continuous improvement of our tools to assist the patient journey. It is important to note that we have the first and only FDA-approved closed-loop neurostimulation system to treat obstructive sleep apnea. And over the past 17 years, we have built very strong clinical evidence with nearly 6,000 patients worldwide and detailed compelling real-world evidence, including over 280 peer-reviewed publications and a strong reimbursement presence with over 260 million covered lives in the United States. We continue to advance therapy adoption and clinical evidence, including expansion of therapy indications to increase the number of patients who can benefit from Inspire therapy. At Inspire, we have built a world-class team, including a direct commercial organization in the United States and numerous global markets. We have also invested heavily in research and development, commercial infrastructure, reimbursement, direct-to-consumer campaigns, medical education programs and clinical trainers to drive continued awareness and adoption of Inspire therapy while focusing on and improving upon our strong patient outcomes. In summary, we remain focused on the patient to continue the growth and adoption of Inspire therapy. We will continue to execute our growth strategy of increasing utilization at existing centers, while adding capacity by opening new centers. As we celebrate the 10-year anniversary of our FDA approval, we remain excited about our future prospects and are confident that we have the appropriate strategy in place to drive long-term stakeholder value. With that, I'd like to turn the call over to Rick for his review of our financials.

Thank you, Tim, and good afternoon, everyone. Total revenue for the first quarter was $164 million, a 28% increase from the $127.9 million generated in the first quarter of 2023. U.S. revenue in the first quarter was $155.8 million, an increase of 25% from the $124.5 million in the prior year period. Revenue outside the U.S. was $8.2 million, which is a 141% increase year-over-year. The global average selling price was consistent year-over-year and with the previous quarter, and we expect ASP to remain at this level for the remainder of 2024. Given the potential of new entrants in the future, we do not expect to continue to report this metric going forward. Gross margin in the first quarter was 84.9%, compared to 84.4% in the prior year period. The increase was driven by improved manufacturing efficiencies and higher volumes. Total operating expenses for the first quarter were $154.5 million, an increase of 21% as compared to $127.5 million in the first quarter of 2023. 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 first quarter compared to $4.3 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 loss for the first quarter was $10 million compared to $15.4 million in the prior year period, representing net loss per share of $0.34, compared to $0.53 in the first quarter of 2023. The weighted average number of shares outstanding for the first quarter was 29.6 million. We expect the full year diluted shares outstanding to be 30.4 million. Our total cash and investments were $469 million at March 31 and was consistent with our December 31 balance. The strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers while training and opening new implanting centers. We continue to expect to generate positive cash flow for the full year 2024. Moving on to 2024 guidance. With the strong trends we are seeing in our business, we now expect full year revenue to be in the range of $783 million to $793 million, representing an increase of 25% to 27%, compared to full year 2023 revenue. We expect full year gross margin to be in the range of 83% to 85%. We continue to expect to activate 52 to 56 new U.S. centers and establish 12 to 14 new U.S. sales territories during each remaining quarter in 2024. While we are early in our adoption and we'll continue to expand our footprint by opening new centers and territories, we believe profitability is a more relevant metric in tracking our financial performance going forward. Starting in 2025, we will focus on revenue growth and earnings per share, and will no longer provide center or territory guidance metrics. With the strong momentum in our business and improving leverage, we anticipate the diluted net income per share for the full year 2024 will be between $0.10 to $0.20. Our strong performance and business momentum give us confidence in our outlook for the rest of 2024. With that, our prepared remarks are finished, and you may now open the line for questions.

Please standby while we compile the Q&A roster. Our first question comes from the line of Danielle Antalffy from UBS.

I have a quick question regarding the U.S. performance for the quarter. We’ve seen 25% growth, which is quite strong, but it fell short of expectations. Could you share some insights on the street modeling? The sequential decline in utilization appears to be less in Q1 compared to Q4 than we have historically seen, which is positive. However, I'm curious about the mix between Medicare and private pay, and especially any developments on the private pay side, such as with UnitedHealth and their new requirements for documentation on oral appliances. I apologize for the multitude of questions, but any additional details on U.S. performance would be appreciated.

Thanks, Danielle. I think I got it. Yes, we did talk a little bit about the seasonality expected in the quarter. We did have a strong Q1 last year offset with some of the silicon lead inventory that we're shipping and we knew we had a strong Q4 coming in as well. So we expected the higher seasonality. The team did well. The team held tight to come in where we expected to be with a 15% seasonality. And we do see the utilization continuing to be strong as we move forward going into the year, and therefore, we have confidence in being able to increase our guidance. We do understand the concerns over some of the private pay and the prior authorizations and specifically UnitedHealthcare with oral appliance therapy. We are tracking that very closely, and with United as we work hard to document the prior authorization is going in, and we don't see any significant pushback at this point. Don't believe it has any impact on our business. Again, we feel we're in a good position moving forward for the rest of the year.

And I show our next question comes from the line of Robbie Marcus from JPMorgan.

This is Alan on for Robbie. I had, I guess, a bit of a follow-up to the first question on the U.S. despite the U.S. experience and this heightened seasonality, you did end up raising the guide by, I'd say, a fair multiple of the beat largely driven by OUS, so what are you seeing that gives you confidence into the second quarter to raise guidance by this much? And should we think about that as something from utilization, dock adds, center adds?

Well, I think it's all of the above. I think we do see good demand for the therapy across the board. We do see an uptick in utilization as we move through the year. I think we did have confidence to increase the guide, focusing more on the latter half, but have confidence going forward with the demand for the product within the United States with the increased number of centers that we opened up and continue to drive utilization.

And I show our next question comes from the line of Travis Steed from Bank of America.

When do you think U.S. center utilization is slowing down? Even if we exclude the new centers this quarter, it seems to align with the second half of last year, which was marked by prior authorization issues. I haven't observed any improvement in that area. I'm curious if there's something happening with the new centers being added, older centers reaching maturity, or any kind of reimbursement changes. Additionally, I'm wondering why you have decided not to report some of the metrics we typically use to monitor utilization.

I believe our focus remains on utilization. If we look back to the first quarter, our position is quite similar to where we were a year ago, especially when considering inventory shipments with silicone leads. We typically experience seasonality as we transition from Q4 to Q1, which leads to a ramp-up that supports our confidence in increasing our guidance for the second half of the year. As the company matures, we are prioritizing revenue reporting and are pleased to commit to profitability moving forward. Consequently, reporting on the number of centers and new additions has become less critical for us, and there are proprietary reasons for this decision. Nonetheless, we aim to ensure that we provide relevant information for stakeholders to effectively model the business, as profitability will be essential for their understanding.

Thank you. And I show our next question comes from the line of Adam Maeder from Piper Sandler.

I wanted to start with a guidance question. Regarding the raised guidance, I would like to better understand if that is primarily attributed to the international business or if it should be distributed across both the U.S. and international markets. Please help us think through that. Also, any insights you can share about Q2 trends so far would be appreciated. I have the Street consensus revenue for Q2 at $188 million, and any comments on that would be helpful. Finally, I have one follow-up question. Thank you.

Okay. That sounds good. I think that when we look at it, we're seeing good progress in Europe. We did have a little bit of a rebound effect with the derogation in Germany, which is strong, but we're seeing strong momentum going forward there, too. So the European team is performing very well as is the team in the United States. So well, I think there is a complementary element to some growth in international revenue, which is wonderful.

Yes, Adam, this is Rick. I will also add that we have historically seen seasonality in the first quarter. In terms of our overall revenue for the year, it typically increases as the year progresses. Therefore, I would suggest that the increase in our guidance should primarily be observed in the second half of the year.

I got it. And guys, I apologize. I guess I'm a little confused. So the guidance raise is attributable to both the U.S. and OUS business going forward, which you kind of spread it across both those geographies. Is that correct?

Yes. From an outside the U.S. perspective, we do not provide quarterly guidance for either the outside U.S. or U.S. markets. However, we did experience some catch-up in the first quarter, and outside the U.S., we had a strong start to the year. We anticipate some additional catch-up into 2024, though to a slightly lesser degree. We are not projecting any sequential growth outside the U.S., but we are optimistic about continued positive performance in those markets.

Okay. And if I may, just with a follow-up. I wanted to ask about SURMONT-OSA, data came in pretty much as expected down the fairway. I did want to ask how you're thinking about any potential impact to the patient funnel either in the back half of '24, '25. Are you hearing anything in the field from docs or reps? Will folks look to potentially try a GLP-1 before going forward with an Inspire procedure? Or do you think there's going to be no impact to the funnel?

Yes, so we take other docs and we talk to our field. We do hear discussions around the GLP-1s, and we know the patients with high BMI tend to get screened out with the sleep endoscopy and there are patients who have reported being able to use the GLP-1 to be able to lose weight and therefore, qualify for Inspire. So very early, early days, but we do get positive reports on that and look forward to continuing to focus on that as we move through the rest of the year.

And I show our next question comes from the line of Kallum Titchmarsh from Morgan Stanley.

Just on the recent commercial insurance update. I know some of the policies kicked in, in March. Curious to hear about any early interest or momentum you've seen from those high BMI and HI patients as well as the pediatric down syndrome population as well. Now they're in scope for coverage. Just any color on initial progress there would be great.

Thank you very much. I think we see more progress with the high AHI, the high apnea-hypopnea index because that's a natural step for those patients to be able to receive approval. And we're able to move some of the prior authorizations in process to bring them in and move that forward. With the high BMI approval, remember, that's just a change to the warning to allow patients with a BMI up to 40, but it's still very important that we treat tongue-based collapse versus lateral wall and we do today still use sleep diagnostics to screen those out. So not a significant impact with the high BMI yet, but that's something as we just talked about with the GLP-1s that perhaps we can leverage that to take advantage there. And the fun news is with the pediatric population. It's a group that we really care about. We continue to grow the awareness there, and we are opening up additional children's hospitals to be able to participate with Inspire. So we're starting to see some movement with that population as well.

And our next question comes from the line of David Rescott from Baird.

I wanted to follow up on the kind of profit or the positive kind of profit guidance that you gave for the full year. Maybe just wondering what some of the bigger drivers are behind that? I know you talked about some more targeted kind of DTC spend in 2024 previously, wondering how big of a piece that is. And when we think about the cadence of that through the year, should we expect that to be more back-end loaded where you have a pretty positive Q4 that kind of outweighs the losses in the rest of the year? Or do you think in Q3 you have the potential to deliver a positive quarter as well.

David, it's Rick. I'll take that question. So yes, in the first quarter, our DTC spend was $26 million, a little bit increase over year-over-year. But as we've talked about in the past, in 2023, we spent about $100 million in DTC. And as we mentioned, with the increased demand, from patients, physicians and adding new centers, we'll continue those investments. But again, that rate will really be moderate, nearly flat for 2024 because we are focusing on more targeted digital advertising to go after qualified patients and hopefully improve that conversion. So from a profitability standpoint, as we continue to increase revenue, DTC spend will be flat versus 2023. R&D will continue to spend high teens percentage of revenue. And so that leverage will be gained in increased utilization. And so we put forth the new guidance, and that we're excited about, which is the bottom line of $0.10 to $0.20 earnings per share on the bottom line. We mentioned before that we'd be profitable for the second half of the year, and now we're guiding to profitability for the full year. But we haven't broken down in which quarter that we turned that corner, but we're excited about the ability to be profitable for the year.

And I show our next question comes from the line of Anthony Petrone from Mizuho.

Thanks for getting us in here this afternoon, hope everyone is doing well. One dynamic on in the U.S. to explore a little bit, just the sort of pushout of Inspire V, do you think there's maybe a little bit of pause that you saw in 2Q that could maybe extend in 1Q that can extend into 2Q? How did that dynamic play out in the quarter? And I'll have a quick follow-up.

Sure. No, we don't see any delay. We like with the progress we make with Inspire V and the package are fully put together and it's in review with the FDA, and we're running our program and turning our soft launch later this year and a full launch in '25. So we still remain very, very excited about the Inspire V portfolio that we'll be launching.

To provide some context regarding UnitedHealthcare and their expanded coverage, they took a preemptive measure with mandibular repositioning devices. While this might seem like a small step, it has led to a significant expansion in coverage to align with FDA standards. Could you share your thoughts on any potential issues related to mandibular devices? On the other hand, it appears this is a substantial opportunity for overall coverage. How do you see this dynamic evolving for the rest of the year specifically with United?

Yes. Thank you for your insightful comment. We agree that the potential benefits of high AHI cases and the pediatric population significantly outweigh the documentation requirements for the prior authorization of mandibular advancement devices or oral appliance therapy. Our team ensures that healthcare providers have the necessary documentation and prior authorizations submitted to UnitedHealthcare. We do not anticipate major challenges with documenting the oral appliances, and we see considerable potential, particularly with high AHI cases and, secondly, the pediatric demographic. So, thank you for your great observation.

And I show our next question comes from the line of Christopher Pasquale from Nephron.

One quick one on Predictor. Just any plans to present that data or disclose the headline results prior to publication.

Sure. We'll probably have a presentation down the road. Where we stand today and with the timing of the ASM, which is the sleep meeting at June, I don't think we're going to be in a position to present there, but we will be looking for a public conference as we work publication in parallel. So we'll still push for later in the summer or early fall possibly with the AAO ISS meeting. But we will look to get that information out as soon as we can.

Okay, circling back to SURMOUNT, when considering your current patient population, I've noticed that the average BMI in the ADHERE registry was around 29. Do you believe this is still a true representation of the patients you are treating commercially? Or has that changed since the label expansion? I want to clarify the difference between the patients in the study at the outset and those you are encountering regularly.

No, I think good observation again. I think the patient in the BMI and the STAR trial is consistent with the BMI that we saw in our 5,000-patient ADHERE registry. And it reflects patients that have a sleep endoscopy and do not have significant lateral wall collapse and that's very consistent with the reports of the SURMOUNT-OSA trial whose the patient started with the BMI at 39. So you would expect those patients to be predominantly lateral wall collapse and as they lose weight, they can be lax and expose the tongue-based collapse that so effectively treated with Inspire. So I think very, very good consistency from the data that we saw and really look forward to seeing additional data when it comes out, hopefully, in the summer.

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

Can you please confirm if the launch timing for Inspire V is still expected to be the same as it was in your last update? Additionally, I'm curious about your thoughts on how both physicians and consumers are anticipating the release of Inspire V compared to the current solution. Is there a concern about potential delays in treatment, even if they are temporary, and are these factors being considered in your guidance or in your preparations?

Yes, we are executing our plan as discussed in our previous earnings call. There is always a risk of patients being aware of the new program, but we will not promote it until it is fully launched. Therefore, we believe the risk of patients postponing treatment for the new technology is quite low. Our past product experiences support this, as we have not seen delays in treatment for similar reasons. We are certainly mindful of this and will keep an eye on the situation, but we do not expect it to have a significant effect since patients with untreated moderate to severe sleep apnea are highly motivated to seek therapy.

Got it. And maybe just one follow-up on what you are and aren't going to provide going forward. It sounds like you will continue providing new account openings and utilization for the remainder of '24, but starting in '25, you will no longer provide new account openings. If that’s correct, how will you assist analysts and the investment community in understanding the utilization trend in the business? What will you provide in that regard?

That's correct. And what we're going to be focusing on is our top line revenue growth as well as more importantly, on profitability going forward. and we'll continue with discussions with you. But I think the focus is really going to be top line, bottom line reported to be consistent across the industry.

And I show our next question comes from the line of Shagun Singh from RBC.

I was wondering if you could discuss the Inspire V and PREDICTOR study readouts. We've received quite positive feedback, particularly regarding Inspire V. Do you have any insights on how it might affect operating times and potentially boost utilization? Also, regarding the PREDICTOR study, how significant could its impact be in accelerating the patient funnel? Lastly, I would like to know if there are any updates on trends in OSA diagnoses. You've previously mentioned several factors like GLP-1s, AFIB, and DTC. It seems there is increasing awareness among primary care physicians, so is there anything you've observed related to diagnosis?

Fantastic. I got them all. Okay. So with Inspire V, yes, we do expect to have a reduction in operating time, operating room time for the surgeon, specifically because that will remove the pressure sensing lead, which is now going to be incorporated inside the INSPIRE V neurostimulator. So it's one less product that the surgeon needs to implant. And so we believe that that's going to have a significant reduction. We have talked in the past of our average OR time today being between 60 and 90 minutes. And we believe with Inspire V, it could go down to between 45 and 60 minutes. So a significant reduction in the time to perform the procedure. So we think that's going to be very well accepted, both for the patient as well as the surgeon. Secondly, as far as the patient funnel goes, we know the time for a patient to contact a health care provider, go through the diagnostic process and get scheduled and receive Inspire therapy takes a significant amount of time. and a key part of it in the middle is to perform the drug-induced sleep endoscopy. It could add anywhere from 1 to 3 months to the time depending upon the scheduling of that specific surgeon. So we believe with predictor if we can identify the population of the patients with low BMI that don't necessarily need to have a sleep endoscopy, and we can have an alternative review that we can reduce the OR time for those patients. We believe patients with the higher BMIs likely will have to continue with sleep endoscopy, but we're going to keep working on the data analysis to be able to show that. But hopefully, in a significant number of patients, we can show an improvement in the patient experience, meaning the time from contact to receiving therapy. And then finally, talking about the trends in obstructive sleep apnea, not only with the awareness that the GLP-1 drugs can create. And those elements such as Oprah on a TV show really creates awareness. And when those patients go to their general practitioner, they will be diagnosed for diabetes, heart failure and obstructive sleep apnea. So we believe that will increase the diagnostic rate of obstructive sleep apnea. Secondly, patients are aware of how well they sleep. We have smartphones. There are watches that are coming out that will track the quality of your sleep. So generally, society has become more aware of their quality of sleep, and we believe that will just continue to increase the awareness in the diagnostic risk for sleep apnea and therefore, the opportunity for Inspire.

And I show our next question comes from the line of John Block from Stifel.

Maybe just the first one, any update on other private's whole coverage policies changing for the higher BMI AHI? Any update there? And do you expect most on board by the end of 2024. And then the follow-up, Rick, just to shift gears, I'm just curious about the guidance and profitability for the year, you guys continue to be a solid beat and raise story. So let's just say hypothetically, the year ended at, I don't know, $825 million top line and not the $790 million midpoint. How are you going to handle that? Do you see that flow through to the bottom line on the incremental dollar? Or is it one of those things where you sort of take that upside and plow it back into the business? I'm just curious if the $0.10 to $0.20 should move higher proportionally to the potential upside to the revenue targets.

Yes. John, let me take the first one and then hand it off to Rick. As far as the payers go, we have an active program, sending communications out to each of the payers to make sure that they are aware of the FDA approvals for the new indications and encouraging them to update their policies are making very good progress. We would like to have most of them taken care of by the end of the year, although Medicare is always challenging because with the MAC you have to run through a fixed process to be able to meet with CMS, meet with the MAC, go through the update process to be able to get the policies updated and reviewed and implemented. So Medicare is always a little bit of a delay getting through there, but the commercial policies have responded quite well and we expect to continue to keep pushing that as you mentioned for the rest of the year. Let me hand off to Rick on profitability.

Sure, John. First of all, we have not changed our guidance philosophy, and that remains true across all our guidance metrics. However, we are focused on improving center capacity and utilization. As we enhance utilization, I want to communicate that we are making ongoing investments in our business for long-term growth. Our revenue growth has been surpassing our operating expense growth, and we are pleased to announce that we expect to be profitable for the full year on a GAAP basis. With our strong gross margin and operating expenses not increasing as quickly as revenue, we could see improved leverage, but we are not specifying that at this point.

And I show our next question comes from the line of Mike Kratky from Leerink Partners.

The first one, is there a scenario where some of the secondary endpoints from SURMONT-OSA that we could see at ADA could make you or you've heard KOLs think GLP-1s maybe could have a more negative impact on the business?

From the initial data presented, I believe there will be some challenges ahead. If I understand your question correctly, we are eager to see the detailed data, and it's difficult to speculate on what it will reveal. However, looking at the 51% reduction in AHI within the specific group that received therapy alone is quite promising. It suggests that these interventions are aiding patients with a higher BMI in losing weight, thus addressing their lateral wall collapse. As we approach the summer months, I anticipate observing similar trends and gaining insights about distinct BMI groups following weight loss, alongside the specific AHI reductions across various BMI ranges. I'm excited to review that data, as I think it will align with our previous discussions, demonstrating that these GLP-1s can complement Inspire effectively.

Got it. Understood. And then maybe just separately, you mentioned the impact of some of the wearable devices. I know Samsung got FDA approval for their watch earlier this year, it seems like you might get a commercial launch of that in 3Q. Is there any consideration of that in your guidance? And then to what extent does that represent a source of potential upside either near term or longer term?

I don't think we have specifically included the new technologies in our guidance. While it's still early for the watches to be released, smart devices have been around for a while. Our outreach programs are crucial for increasing awareness, and we continue to dedicate considerable time to collaborating with general practitioners and cardiologists to enhance our referral networks, which is a traditional approach in medical technology marketing to drive referrals. Therefore, we haven't detailed in our guidance how we are addressing the new technologies, but we do believe they will positively influence our results in the future.

And I show our next question comes from the line of Michael Sarcone from Jefferies.

Just one for me. So on the competitive front, you've got a competitor overseas, they released some U.S. data and it seems like they're going to stress positive data or good results across both non-supine and supine positioning as maybe a point of differentiation when they start detailing in the U.S. Just wanted to get your take on have you had conversations with physicians, your thoughts on how meaningful that could be an efforts or potential to counter detail those claims?

No problem. We don't think it has any impact. We've been discussing supine AHI with our physicians since 2007, and when we launched Inspire. In fact, when I worked on this project at Medtronic in the late '90s and 2000s, we focused on supine AHI. This is not a new phenomenon. Gravity affects sleep apnea, and when you lie supine, gravity pulls the tongue back more than when you lie on your side. When we program our devices, we program for the worst case, meaning in a supine position. So we know the energy levels required to treat supine AHI. That's how patients are programmed. When they roll onto their side, they might be overstimulated, which is true because we want to ensure equal treatment in both supine and non-supine positions, and we had specific items on that in our STAR trial. So this is not a concern. We've been laser-focused on supine AHI since the beginning of the company.

And I show our next question comes from the line of Larry Biegelsen from Wells Fargo.

Well, one question for me, and maybe it will be a very short answer. Rick, to see the profitability progress. Any broad strokes on profitability goals beyond this year? And how should we be thinking about the tax rate?

For 2025, we're not providing overall guidance, but we expect to be profitable in 2024 and anticipate maintaining profitability in 2025 and beyond. We will provide more information regarding the effective tax rate in a future call, as we have a significant amount of Net Operating Losses to recognize.

I show our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets.

This is actually Liz on for Brett. Just one for me. Could you guys provide some updates on your broader DTC strategy and how it's been progressing?

Absolutely. A couple of quarters ago, we discussed refining our program and focusing our direct-to-consumer efforts more strategically toward our demographic, which has been very successful. We continue to grow DTC, and as Rick noted, we have maintained consistency in 2023 while seeing revenue increase as we leverage our DTC program. We're still engaged in national TV advertising and social media, and we are also moving into targeted digital placements that have proven effective. Our DTC program has evolved since we received commercial approval in 2014, and it will continue to evolve as we learn more about how to reach our specific patient population effectively.

And I show our next question comes from the line of Michael Polark from Wolfe Research.

Apologies if I missed this, but the additions to the sales territory this quarter were 11. I believe the forecast for each quarter of the year was between 12 and 14. I see you've maintained the yearly forecast. However, I’m curious about the first quarter of 2011 compared to that range; is it just a timing issue, or is there something noteworthy? I ask because it appears to be a slight deviation from the trend, as you’ve been guiding on this metric for a long time and generally added above the quarterly forecast, while this is slightly below. Any insight on this would be appreciated.

No, they would have to be indiscernible. I think it's the timing. We focus our new territory additions based on where we are opening new centers and where the demand exists. We don't specifically target a certain number of new territories each quarter. There's always a little fluctuation from quarter to quarter, but not a significant change yet. We have reinforced our guidance moving forward, and there may just be a slight timing issue regarding who was prepared in the first quarter to add a new territory, and we will continue to focus on that in the future. Did I jump ahead? Did you have a follow-up for Michael?

And I show our last question in the queue comes from Suraj Kalia from Oppenheimer.

So Tim, a couple of questions. I'll pose them right away, and hopefully, you get the gist of it. First and foremost, Tim, in terms of supine non-supine, right, there was a recent paper highlighting quite low responder rates and AHI reduction with Inspire supine versus non-supine. So I guess if you could help reconcile your comment about the current titration based on a supine position. So help us understand why is the paper off if it is? That is one question. And the second question quickly, MF I could. I understand the consensus commentary about complementarity of glips to OSA to hypoglossal nerve and CPAP. I get all that.

Thank you very much. I will revisit that paper. I think some of it was subjective evidence and not the core data. However, our focus is always on supine AHI. In our clinical studies, we specifically excluded patients who did not have supine AHI or those who were only supine. We assessed that in the STAR trial and have kept it in mind throughout our evaluations. It's clear that supine patients are more challenging to treat due to gravity, but our focus on this aspect has been a priority for Inspire since our inception, and we will maintain that focus moving forward. Regarding GLP-1s being complementary, it relates to their mechanism of action. We've discussed this extensively. Patients with higher BMI tend to experience more lateral wall collapse, and hypoglossal stimulation is designed to address tongue-based obstruction, not lateral wall collapse. As patients have a higher BMI, GLP-1s can complement our treatment by helping them achieve a lower BMI and alleviate lateral wall tension. To answer your question, our belief is that, based on the SURMOUNT-OSA trial, patients with lower BMI do not see the same level of AHI reduction because they lack lateral wall collapse, which GLP-1 is not equipped to treat. That's where Inspire comes in, making our treatments complementary. Thank you for that, Suraj.

This concludes the Q&A session for the conference. I'd now like to turn it back to Tim for closing remarks.

Thank you all 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 the patients remains unmatched and is the most important element to our success. I wish to thank all of our employees as well as the healthcare teams for their continued efforts as we remain focused on further expanding our business in the U.S., Europe and Asia. For all of you on the call, we appreciate your continued interest and support of Inspire, and we look forward to providing you with further updates in the months ahead. Thank you all very much.

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