Inspire Medical Systems, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Inspire Medical Systems, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Inspire Medical Systems, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 13, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. 89 Table of Contents Reserves for excess and obsolete inventory Description of the Matter At December 31, 2025, the Company’s net inventory balance was $145.3 million, which included reserves for excess and obsolete inventory of $1.3 million. As explained in Note 2 to the consolidated financial statements, 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. Auditing management’s estimate for excess and obsolete inventory reserves involved subjective auditor judgment because of the assumptions and judgments used in determining the excess and obsolete inventory reserves, including future demand, technological or market obsolescence resulting from the introduction of new products, and possible alternative uses for existing products. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's process to determine the amount of the Company’s reserve for excess and obsolete inventory. This included controls over the Company’s review of the significant assumptions and judgments used in determining the reserve estimates. To test the adequacy of the Company's excess and obsolete inventory reserves, we performed audit procedures that included, among others, testing the accuracy and completeness of the underlying data used in the reserve calculations. We performed analytical procedures to evaluate the assumptions and judgments used in determining the inventory reserves, specifically future demand and possible alternative uses. We performed inquiries of Company personnel and inspected regulatory approvals to assess the assumptions used in determining the technological or market obsolescence resulting from the introduction of new products. We also audited management’s calculation of the inventory reserves by testing the mathematical accuracy of the Company’s reserve calculations. /s/Ernst & Young LLP We have served as the Company's auditor since 2015. Minneapolis, Minnesota February 13, 2026 90 Table of Contents Inspire Medical Systems, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 104,813 $ 150,150 Investments, short-term 203,455 295,396 Accounts receivable, net of allowance for credit losses of $ 1,080 and $ 880 , respectively 119,692 93,068 Inventories, net 145,293 80,118 Prepaid expenses and other current assets 10,399 12,074 Total current assets 583,652 630,806 Investments, long-term 96,330 70,995 Property and equipment, net 97,872 71,925 Operating lease right-of-use assets 23,532 23,314 Deferred tax assets 88,667 13 Other non-current assets 17,264 11,330 Total assets $ 907,317 $ 808,383 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 36,565 $ 38,687 Accrued expenses 59,490 49,814 Total current liabilities 96,055 88,501 Operating lease liabilities, non-current portion 29,998 30,039 Other non-current liabilities 104 148 Total liabilities 126,157 118,688 Commitments and contingencies (Note 11) Stockholders' equity Preferred Stock, $ 0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding — — Common Stock, $ 0.001 par value, 200,000,000 shares authorized; 28,579,015 and 29,740,176 shares issued and outstanding at December 31, 2025 and 2024, respectively 29 30 Additional paid-in capital 927,159 981,043 Accumulated other comprehensive income 464 536 Accumulated deficit ( 146,492 ) ( 291,914 ) Total stockholders' equity 781,160 689,695 Total liabilities and stockholders' equity $ 907,317 $ 808,383 The accompanying notes are an integral part of these financial statements. 91 Table of Contents Inspire Medical Systems, Inc. Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except share and per share amounts) Year Ended December 31, 2025 2024 2023 Revenue $ 911,981 $ 802,804 $ 624,799 Cost of goods sold 133,225 122,986 96,576 Gross profit 778,756 679,818 528,223 Operating expenses: Research and development 103,165 114,128 116,536 Selling, general and administrative 624,637 529,607 451,958 Total operating expenses 727,802 643,735 568,494 Operating income (loss) 50,954 36,083 ( 40,271 ) Other expense (income): Interest and dividend income ( 17,536 ) ( 23,247 ) ( 20,560 ) Interest expense 137 22 — Other expense, net 2,656 855 195 Total other income ( 14,743 ) ( 22,370 ) ( 20,365 ) Income (loss) before income taxes 65,697 58,453 ( 19,906 ) Income tax (benefit) expense ( 79,725 ) 4,944 1,247 Net income (loss) 145,422 53,509 ( 21,153 ) Other comprehensive income (loss): Foreign currency translation (loss) gain ( 296 ) ( 65 ) 140 Unrealized gain (loss) on investments 224 ( 199 ) 746 Total comprehensive income (loss) $ 145,350 $ 53,245 $ ( 20,267 ) Net income (loss) per share: Basic $ 4.95 $ 1.80 $ ( 0.72 ) Diluted $ 4.89 $ 1.75 $ ( 0.72 ) Weighted average shares outstanding: Basic 29,368,892 29,763,395 29,302,154 Diluted 29,757,036 30,543,274 29,302,154 The accompanying notes are an integral part of these financial statements. 92 Table of Contents Inspire Medical Systems, Inc. Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) 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 595,188 1 25,808 — — 25,809 Vesting of restricted stock units 40,915 — — — — — Shares held for tax withholdings ( 113,062 ) — ( 17,158 ) — — ( 17,158 ) Issuance of common stock 1,575 — 353 — — 353 Issuance of common stock for employee stock purchase plan 27,480 — 5,299 — — 5,299 Stock-based compensation expense — — 82,470 — — 82,470 Other comprehensive income — — — 886 — 886 Net loss — — — — ( 21,153 ) ( 21,153 ) Balance at December 31, 2023 29,560,464 30 917,107 800 ( 345,423 ) 572,514 Stock options exercised, net 376,730 — 21,897 — — 21,897 Vesting of restricted stock units, net 57,824 — ( 4,895 ) — — ( 4,895 ) Issuance of common stock 1,716 — 322 — — 322 Issuance of common stock for employee stock purchase plan 48,599 — 5,605 — — 5,605 Stock-based compensation expense — — 116,007 — — 116,007 Accelerated share repurchase of common stock ( 305,157 ) — ( 75,000 ) — — ( 75,000 ) Other comprehensive loss — — — ( 264 ) — ( 264 ) Net income — — — — 53,509 53,509 Balance at December 31, 2024 29,740,176 30 981,043 536 ( 291,914 ) 689,695 Stock options exercised, net 140,479 — 9,393 — — 9,393 Vesting of restricted stock units and performance stock units, net 266,525 — ( 22,840 ) — — ( 22,840 ) Issuance of common stock 2,580 — 307 — — 307 Issuance of common stock for employee stock purchase plan 52,015 — 5,019 — — 5,019 Stock-based compensation expense — — 130,259 — — 130,259 Accelerated share repurchase of common stock ( 103,886 ) — — — — — Share repurchase of common stock ( 1,518,874 ) ( 1 ) ( 176,022 ) — — ( 176,023 ) Other comprehensive income — — — ( 72 ) — ( 72 ) Net income — — — — 145,422 145,422 Balance at December 31, 2025 28,579,015 $ 29 $ 927,159 $ 464 $ ( 146,492 ) $ 781,160 The accompanying notes are an integral part of these financial statements. 93 Table of Contents Inspire Medical Systems, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 2023 Operating activities Net income (loss) $ 145,422 $ 53,509 $ ( 21,153 ) Adjustments to reconcile net income (loss): Depreciation and amortization 13,957 6,550 2,846 Accretion of investment discount ( 2,889 ) ( 8,859 ) ( 2,469 ) Stock-based compensation expense 130,259 116,007 82,470 Deferred income taxes (benefit) ( 88,749 ) — — Provision (benefit) for estimated credit losses 200 ( 768 ) 1,612 Impairment of strategic investment 4,046 — — Other non-cash expenses 2,111 1,517 2,128 Changes in operating assets and liabilities: Accounts receivable ( 26,233 ) ( 2,602 ) ( 30,218 ) Inventories ( 65,175 ) ( 46,233 ) ( 21,999 ) Prepaid expenses and other current assets 1,651 ( 2,344 ) ( 4,758 ) Accounts payable ( 3,747 ) 604 9,296 Accrued expenses and other liabilities 6,123 12,865 6,898 Net cash provided by operating activities 116,976 130,246 24,653 Investing activities Purchases of property and equipment ( 38,499 ) ( 39,123 ) ( 23,629 ) Purchases of investments ( 240,318 ) ( 418,354 ) ( 281,189 ) Proceeds from sales or maturities of investments 310,381 344,605 10,246 Purchases of strategic investments ( 10,118 ) ( 250 ) ( 250 ) Net cash provided by (used in) investing activities 21,446 ( 113,122 ) ( 294,822 ) Financing activities Proceeds from the exercise of stock options 9,595 22,167 25,809 Accelerated share repurchase of common stock — ( 75,000 ) — Share repurchase of common stock ( 175,019 ) — — Payment of taxes on net share settlement of equity awards ( 23,044 ) ( 5,165 ) ( 17,158 ) Proceeds from the issuance of common stock from employee stock purchase plan 5,019 5,605 5,299 Net cash (used in) provided by financing activities ( 183,449 ) ( 52,393 ) 13,950 Effect of exchange rate on cash ( 310 ) ( 118 ) 164 Decrease in cash and cash equivalents ( 45,337 ) ( 35,387 ) ( 256,055 ) Cash and cash equivalents at beginning of year 150,150 185,537 441,592 Cash and cash equivalents at end of year $ 104,813 $ 150,150 $ 185,537 Supplemental cash flow information Cash paid for interest $ 137 $ 22 $ — Property and equipment included in accounts payable and accrued expenses 4,773 3,386 4,018 Excise taxes accrued but not paid 1,004 — — The accompanying notes are an integral part of these financial statements. 94 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (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 United States ("U.S.") Food and Drug Administration ("FDA"), European Union ("EU"), Medical Devices Regulation, and Japan Pharmaceuticals and Medical Devices Agency-approved neurostimulation technology of its kind that provides a safe and effective treatment for patients with moderate to severe OSA. Inspire therapy received premarket approval from the FDA in 2014 and has been commercially available in certain European markets since 2011 and certain Asia Pacific markets since 2021. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows have been made. The results of operations for the year ended December 31, 2025 are not necessarily indicative of the operating results for any future periods. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements. We use significant judgment when making estimates related to the inventory reserves, stock-based awards, and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Cash and Cash Equivalents We consider all highly liquid securities, readily convertible to cash, that have original maturities of 90 days or less from the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents, which consist of money market funds, are stated at fair value. Foreign Currency Our functional and reporting currency is the U.S. dollar. Our subsidiaries have functional currency in Euro and Yen. The consolidated financial statements are translated to U.S. dollars. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the balance sheet date exchange rate. Sales and expenses denominated in foreign currencies are translated at transaction date exchange rates. 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 income (loss). For the years ended December 31, 2025, 2024, and 2023, we recognized a total of $ 1.0 million of gains, $ 0.9 million of losses, and $ 0.2 million of losses, net, respectively. Any unrealized gains and losses due to translation 95 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) adjustments are included in accumulated other comprehensive income within stockholders' equity in the consolidated balance sheets. We had $ 0.1 million of unrecognized loss and $ 0.2 of unrecognized gain in our accumulated other comprehensive income balance as of December 31, 2025 and 2024, respectively. Investments Our investments are classified as available-for-sale and consisted of the following: December 31, 2025 Amortized Unrealized Gross Aggregate Cost Gains Losses Fair Value Short-Term: Commercial paper $ 22,103 $ 25 $ — $ 22,128 Corporate debt securities 57,694 134 — 57,828 U.S. Treasury debt securities 123,281 220 ( 2 ) 123,499 Short-term investments $ 203,078 $ 379 $ ( 2 ) $ 203,455 Long-Term: Corporate debt securities $ 58,726 $ 128 $ ( 9 ) $ 58,845 Asset-backed securities 1,198 3 — 1,201 U.S. Treasury debt securities 36,094 190 — 36,284 Long-term investments $ 96,018 $ 321 $ ( 9 ) $ 96,330 December 31, 2024 Amortized Unrealized Gross Aggregate Cost Gains Losses Fair Value Short-Term: Commercial paper $ 19,806 $ 25 $ — $ 19,831 Corporate debt securities 47,226 80 ( 7 ) 47,299 Certificates of deposit 7,684 10 — 7,694 U.S. Treasury debt securities 220,283 346 ( 57 ) 220,572 Short-term investments $ 294,999 $ 461 $ ( 64 ) $ 295,396 Long-Term: Corporate debt securities $ 23,915 $ 59 $ ( 49 ) $ 23,925 Asset-backed securities 287 — — 287 U.S. Treasury debt securities 46,818 50 ( 85 ) 46,783 Long-term investments $ 71,020 $ 109 $ ( 134 ) $ 70,995 The following table shows all available-for-sale investments in an unrealized loss position for which an allowance for credit losses has not been recorded and the related gross unrealized loss and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: 96 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) December 31, 2025 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Corporate debt securities $ 13,231 $ ( 9 ) $ — $ — $ 13,231 $ ( 9 ) U.S. Treasury debt securities 26,474 ( 2 ) — — 26,474 ( 2 ) Total $ 39,705 $ ( 11 ) $ — $ — $ 39,705 $ ( 11 ) December 31, 2024 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Corporate debt securities $ 11,728 $ ( 56 ) $ — $ — $ 11,728 $ ( 56 ) U.S. Treasury debt securities 69,402 ( 220 ) — — 69,402 ( 220 ) Total $ 81,130 $ ( 276 ) $ — $ — $ 81,130 $ ( 276 ) 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 income within stockholders' equity. We had $ 0.6 million and $ 0.4 million of unrecognized gains in our accumulated other comprehensive income balance at December 31, 2025 and 2024, 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 income (loss). We recorded $ 0 of gross realized gains from the sale or maturity of available-for-sale investments during each of the years ended December 31, 2025, 2024, and 2023. We recorded $ 0 of gross realized losses from the sale or maturity of available-for-sale investments during each of the years ended December 31, 2025, 2024, and 2023. As of December 31, 2025, we had no investments with a contractual maturity of greater than three years. Currently, we do not intend to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. We do not consider those investments to be other-than-temporarily impaired as of December 31, 2025. 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 in the consolidated statements of operations and comprehensive income (loss). The total allowance for credit losses was $ 0 at both December 31, 2025 and 2024. 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. 97 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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 debt 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 money market funds and available-for-sale securities are held by two custodians who obtain 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 December 31, 2025 and 2024. 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 December 31, 2025 Estimated Fair Value Level 1 Level 2 Level 3 Cash equivalents: Money market funds $ 64,378 $ 64,378 $ — $ — Total cash equivalents 64,378 64,378 — — Investments: Commercial paper 22,128 — 22,128 — Corporate debt securities 116,673 — 116,673 — Asset-backed securities 1,201 — 1,201 — U.S. Treasury debt securities 159,783 159,783 — — Total investments 299,785 159,783 140,002 — Total cash equivalents and investments $ 364,163 $ 224,161 $ 140,002 $ — 98 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) Fair Value Measurements as of December 31, 2024 Estimated Fair Value Level 1 Level 2 Level 3 Cash equivalents: Money market funds $ 59,606 $ 59,606 $ — $ — Total cash equivalents 59,606 59,606 — — Investments: Commercial paper 19,831 — 19,831 — Corporate debt securities 71,224 — 71,224 — Certificates of deposit 7,694 — 7,694 — Asset-backed securities 287 — 287 — U.S. Treasury debt securities 267,355 267,355 — — Total investments 366,391 267,355 99,036 — Total cash equivalents and investments $ 425,997 $ 326,961 $ 99,036 $ — There were no transfers between levels during the years ended December 31, 2025 and 2024. 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 December 31, 2025 and 2024, 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- 99 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) off is recorded in the period in which the account receivable is deemed uncollectible. Recoveries are recognized when received and as a direct credit to earnings or as a reduction to the allowance for credit losses (which would indirectly reduce the loss by decreasing bad debt expense). The following table presents the changes in the allowance for credit losses related to accounts receivable: Year Ended December 31, 2025 2024 2023 Balance at beginning of period $ 880 $ 1,648 $ 36 Charges (credits) to the allowance, net 923 957 1,622 Write-offs charged against the allowance ( 127 ) ( 1,554 ) ( 10 ) Recoveries of amounts previously reserved ( 596 ) ( 171 ) — Balance at the end of the period $ 1,080 $ 880 $ 1,648 The increase in accounts written off, net of recoveries during the year ended December 31, 2024 related primarily to accounts receivable with two healthcare systems. Inventories Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first-out basis, and consisted of the following: December 31, 2025 2024 Raw materials $ 19,097 $ 22,430 Work in process 13,837 — Finished goods 112,359 57,688 Total inventories, net of reserves $ 145,293 $ 80,118 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. In August 2024, we received approval from the FDA for our Inspire V neurostimulator, which we began to market for sale in the U.S. in 2025. 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 $ 1.3 million and $ 1.0 million as of December 31, 2025 and 2024, respectively. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization and consisted of the following: 100 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) December 31, 2025 2024 Internal-use software $ 33,168 $ 16,553 Manufacturing equipment 46,910 29,117 Other equipment 7,296 4,981 Leasehold improvements 11,768 10,057 Construction in process 24,380 24,975 Property and equipment, cost 123,522 85,683 Less: accumulated depreciation and amortization ( 25,650 ) ( 13,758 ) Property and equipment, net $ 97,872 $ 71,925 Internal-use software costs are capitalized during the application development stage. Costs related to planning and post implementation activities are expensed as incurred. Capitalized internal-use software is amortized, and recognized as cost of goods sold or selling, general and administrative expenses, on a straight-line basis over the estimated useful life of three years . Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Construction in process is comprised primarily of manufacturing equipment. Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to ten years . Depreciation and amortization expense was $ 14.0 million, $ 6.6 million, and $ 2.8 million during the years ended December 31, 2025, 2024, and 2023, respectively. Strategic Investments For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These securities are presented within other non-current assets on the consolidated balance sheets. The balance of equity securities without readily determinable fair values was $ 16.4 million and $ 10.6 million as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, we invested $ 10.1 million and $ 0 in minority interests of private companies, respectively. We recognized an impairment charge of $ 4.0 million during the year ended December 31, 2025 in other expense (income), net in the consolidated statements of operations and comprehensive income (loss) due to an observable price change of one of the equity securities that had an original carrying amount of $ 10.0 million. No impairment charge was recognized during the year ended December 31, 2024. Impairment of Long-lived Assets Long-lived assets consist primarily of property and equipment, operating lease right-of-use assets, and strategic investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that an asset be tested for possible impairment, we compare the undiscounted cash flows expected to be generated by the asset to the carrying amount of the asset. If the carrying amount of the asset is not recoverable on an undiscounted cash flow basis, we determine the fair value of the asset and recognize an impairment loss to the extent the carrying amount of the asset exceeds its fair value. We determine fair value using the income approach based on the present value of expected future cash flows or other appropriate measures of estimated fair value. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. We did not record any impairment charges on long-lived assets, other than strategic investments, during the years ended December 31, 2025, 2024, or 2023. We recorded impairment charges on strategic investments of $ 4.0 million, $ 0.0 million, and $ 0.4 million during the years ended December 31, 2025, 2024, and 2023, respectively. 101 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) Accrued Expenses Accrued expenses consisted of the following: December 31, 2025 2024 Payroll related $ 46,470 $ 40,162 Income tax payable 2,452 1,612 Product warranty liability 587 933 Operating lease liabilities, current portion 2,157 1,754 Other accrued expenses 7,824 5,353 Total accrued expenses $ 59,490 $ 49,814 The following table shows the changes in our estimated product warranty liability accrual, included in accrued liabilities: Year Ended December 31, 2025 2024 2023 Balance at beginning of period $ 933 $ 1,100 $ 920 Provisions for warranty 85 593 912 Settlements of warranty claims ( 431 ) ( 760 ) ( 732 ) Balance at the end of the period $ 587 $ 933 $ 1,100 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 102 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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, costs of supporting our digital platforms, 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 manufacturing equipment, and operations and quality supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel. Research and Development Research and development expenses consist primarily of product development, clinical and regulatory affairs, quality assurance, consulting services, and other costs associated with products and technologies in development. These expenses include employee compensation, including stock-based compensation, supplies, materials, prelaunch inventory, consulting, and travel expenses related to research and development programs. Clinical expenses include clinical study design, clinical site reimbursement, data management, travel expenses, and the cost of manufacturing products for clinical studies. We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized. Stock-Based Compensation We maintain an equity incentive plan to provide lon g-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 income (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 requisite service period, which is the vesting period or term to become eligible for a qualified retirement 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 $ 114.9 million, $ 94.9 million, and $ 100.3 million during the years ended December 31, 2025, 2024, and 2023, respectively. 103 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) Leases Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities – non-current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments, and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our consolidated balance sheets. Income Taxes We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances against deferred tax assets are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. Prior to December 31, 2025, as we historically incurred operating losses, we recorded a full valuation allowance against our net deferred tax assets. As of December 31, 2025, we determined that it is more-likely-than-not that our federal and a majority of state deferred tax assets will be realized. As a result, we recorded a release of the valuation allowance associated with these deferred tax assets, which was due in part to achieving three years of cumulative taxable income and projected taxable income that is more than sufficient to realize our federal and a majority of state deferred tax assets. We record a federal, state, and foreign tax provision, which includes a foreign tax reserve relating to uncertain tax positions. We use financial projections to support our net deferred tax assets, which contain significant assumptions and estimates of future operations. If such assumptions were to differ significantly, it may have a material impact on our ability to realize our deferred tax assets. At the end of each period, we will reassess the ability to realize our deferred tax assets. If it is more likely than not that we would not realize the deferred tax assets, a valuation allowance may need to be established against all or a portion of the deferred tax assets, which will result in a charge to tax expense. Our policy is to record interest and penalty expense related to uncertain tax positions as other expense in the consolidated statements of operations and comprehensive income (loss). Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and changes in unrealized gains and losses due to interest rate fluctuations and other external factors on investments classified as available-for-sale, and foreign currency translation adjustments. Accumulated other comprehensive income is presented in the accompanying consolidated balance sheets as a component of stockholders' equity. Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. For the periods presented with a net loss, diluted net loss per share is 104 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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. Purchase Commitments We had purchase commitments to suppliers for purchases totaling $ 90.5 million as of December 31, 2025. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income-Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The guidance requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. ASU 2024-03 also requires disclosure of the total amount of selling expenses and our definition of selling expenses. The ASU is effective for our annual reports beginning in fiscal 2027, and interim period reports beginning in fiscal 2028 either on a prospective or retrospective basis. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2024-03 on our financial statement disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software . This ASU modifies the criteria for when software costs may be capitalized by eliminating consideration of software project development stages and by enhancing guidance for the "probable-to-complete" threshold. This ASU is effective for our annual reports beginning in 2028, and interim periods within those annual reporting periods. Early adoption of this ASU is permitted. We are currently evaluating the impact that adoption of this ASU may have on our financial statements and disclosures. We have reviewed and considered all other recent accounting pronouncements that have not yet been adopted and believe there are none that could potentially have a material impact on our business practices, financial condition, results of operations, or disclosures. 3. Leases We lease office space for our corporate headquarters under a non-cancelable operating lease. The prior 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 2035. In October 2024, we entered into an amendment on this lease which provides approximately 10,000 square feet of additional space. We entered into a 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 2035. In March 2024, we entered into an amendment on this lease which commenced in January 2025 which provides for approximately 18,000 square feet of additional space. Each lease described above 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. 105 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) The following table presents the lease balances within the consolidated balance sheets: December 31, 2025 2024 Right-of-use assets: Operating lease right-of-use assets $ 23,532 $ 23,314 Operating lease liabilities: Accrued liabilities 2,157 1,754 Operating lease liabilities, non-current portion 29,998 30,039 Total operating lease liabilities $ 32,155 $ 31,793 The cost components of our operating leases were as follows: Year Ended December 31, 2025 2024 2023 Operating lease cost $ 3,430 $ 2,954 $ 2,166 Short-term lease cost 323 274 250 Variable lease cost 2,521 2,211 1,667 Total lease cost $ 6,274 $ 5,439 $ 4,083 Variable lease costs consist primarily of taxes, insurance, and common area maintenance costs. Maturities of our lease liability for our operating lease are as follows as of December 31, 2025: 2026 $ 3,196 2027 3,603 2028 4,152 2029 4,285 2030 4,422 Thereafter 21,264 Total undiscounted lease payments 40,922 Less: imputed interest ( 8,767 ) Present value of lease liability $ 32,155 As of December 31, 2025, the remaining lease terms were 9.4 years and the weighted average discount rate was 4.9 %. The operating cash outflows (inflows) from our operating leases were $ 3.3 million, $( 3.3 ) million, and $ 2.2 million for the years ended December 31, 2025, 2024, and 2023, respectively. 4. Employee Retirement Plan We sponsor a defined contribution employee retirement plan covering all of our full-time employees. The plan allows eligible employees to defer a portion of their eligible compensation up to the maximum allowed by IRS Regulations. We make voluntary matching contributions of 50 % of the first 6 % of each participating employee's contribution, up to 3 % of eligible earnings. Our match contributions are made to funds designated by the participant, none of which are based on Inspire common stock, and totaled $ 5.6 million, $ 4.7 million, and $ 3.7 million for the years ended December 31, 2025, 2024, and 2023 respectively. 106 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 5. Stockholders' Equity Share Repurchase Programs In August 2024, our Board of Directors authorized the repurchase of up to $ 150.0 million of our outstanding shares of common stock from time to time through open market transactions, privately negotiated transactions, tender offers, or other means (the “2024 share repurchase program”). We are not obligated to repurchase any specific number of shares and the program may be modified, suspended, or discontinued at any time. The share repurchase program was set to expire in August 2026, subject to the earlier termination or extension by the Board, in its sole discretion and without prior notice. In November 2024, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a large financial institution to repurchase common stock as part of the 2024 share repurchase program. Under the ASR Agreement, the financial institution delivered a portion of shares to us at contract inception and delivered the remaining shares at settlement. We made a prepayment of $ 75.0 million and received an initial delivery of 305,157 shares of common stock. We retired the initial shares delivered and recorded a $ 75.0 million reduction to additional paid-in capital. We accounted for the variable component of shares to be delivered under the ASR Agreement as a forward contract indexed to our common stock, which met the criteria for equity classification, and therefore, was accounted for as a component of equity. In January 2025, we were notified of the early termination of the ASR Agreement. Upon final settlement in January 2025, we received an additional 103,886 shares of common stock from the financial institution. The final number of shares received was based on the volume-weighted average price of our common stock during the term of the ASR Agreement, less a discount and subject to adjustment pursuant to the terms of the ASR Agreement. The total shares repurchased under the ASR Agreement was 409,043 shares with the average share price of $ 190.29 . During 2025, we purchased an additional 442,649 shares for the remaining $ 75.0 million under Rule 10b5-1 under the 2024 share repurchase program. As of March 31, 2025, no amount remained available for future repurchases under the 2024 share repurchase program. In August 2025, our Board of Directors authorized the repurchase of up to $ 200.0 million of our outstanding shares of common stock from time to time through open market transactions, privately negotiated transactions, tender offers, or other means (the “2025 share repurchase program”). We are not obligated to repurchase any specific number of shares and the program may be modified, suspended, or discontinued at any time. The 2025 share repurchase program will expire in August 2027, subject to the earlier termination or extension by the Board, in its sole discretion and without prior notice. During 2025, we purchased 1,076,225 shares for $ 100.0 million under Rule 10b5-1 under the 2025 share repurchase program. Our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the consolidated statements of equity. As of December 31, 2025, $ 100.0 million remained available for future repurchases under the 2025 share repurchase program. 6. Stock-Based Compensation As of December 31, 2025, there were 4,598,570 shares reserved for issuance under the Inspire Medical Systems, Inc. 2018 Incentive Award Plan, of which 1,319,587 shares were available for issuance. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is the vesting period or term to become eligible for a qualified retirement for stock options and RSUs, and over the vesting and 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. 107 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) During the year ended December 31, 2025, we recorded accelerated stock-based compensation expense of $ 11.2 million for employees who are retirement eligible in accordance with the implementation of changes to the treatment of equity awards under the Inspire Medical Systems, Inc. 2018 Incentive Award Plan upon the holder's death, disability, or retirement. Stock Options Stock options are granted to employees at the exercise price, which is equal to the closing price of our stock on the date of grant. The stock options include a four-year service period and 25 % vest after the first year of service and the remainder vest in equal monthly installments over the next 36 months of service. Unvested options are forfeitable in the event of termination other than for death, disability, or qualifying retirement. Upon death, disability or qualifying retirement, all outstanding and unvested options accelerate and become fully vested. 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. There were no stock options granted during the year ended December 31, 2025. Option Value and Assumptions Year Ended December 31, 2024 2023 Weighted average fair value $ 113.56 $ 149.70 Assumptions: Expected term (years) 6.25 6.25 Expected volatility 58.6 % - 61.0 % 56.4 % - 58.2 % Risk-free interest rate 3.67 % - 4.71 % 3.49 % - 4.89 % Expected dividend yield — % — % Expected Term — Due to our limited amount of historical exercise, forfeiture, and expiration activity, we have opted to use the "simplified method" for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting terms and the original contractual term of the option. We will continue to analyze our expected term assumption as more historical data becomes available. Expected Volatility — During the year ended December 31, 2024, we based expected volatility on the historic volatility of our common stock. Prior to 2024, due to our limited company specific historical and implied volatility data, we incorporated our historical stock trading volatility with those of a group of similar companies that are publicly traded for the calculation of volatility. When selecting this peer group, we generally selected companies with comparable characteristics, including enterprise value, stages of clinical development, risk profiles, position within the industry, and those with historical share price information sufficient to meet the expected life of the stock-based awards. Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. government Treasury instruments with maturities similar to the expected term of our stock options. Expected Dividend Yield — The expected dividend assumption is based on our history of not paying dividends and our expectation that we will not declare dividends for the foreseeable future. 108 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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 441,394 $ 257.22 Exercised ( 595,188 ) $ 45.09 $ 105,952 Forfeited/expired ( 59,799 ) $ 214.61 Outstanding at December 31, 2023 2,447,141 $ 152.17 7.0 $ 160,691 Granted 247,048 $ 177.99 Exercised ( 387,856 ) $ 62.37 $ 49,221 Forfeited/expired ( 146,184 ) $ 195.27 Outstanding at December 31, 2024 2,160,149 $ 168.33 6.4 $ 89,052 Exercised ( 163,445 ) $ 70.31 $ 13,739 Forfeited/expired ( 134,818 ) $ 222.71 Outstanding at December 31, 2025 1,861,886 $ 173.07 5.4 $ 38,524 Exercisable at December 31, 2025 1,627,185 $ 166.07 5.1 $ 38,524 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. The total grant date fair value of options vested during the year was $ 38.9 million, $ 56.7 million and $ 45.7 million for the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, the amount of unearned stock-based compensation currently estimated to be expensed from now through the year 2028 related to unvested stock options is $ 26.4 million which we expect to recognize over a weighted average period of 1.5 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 in the event of termination other than for death, disability, or qualifying retirement. Upon death or disability, all outstanding and unvested RSUs accelerate and become fully vested and settled. Upon qualifying retirement, all outstanding and unvested RSUs remain outstanding and settle in accordance with the original vesting and payment terms applicable to such RSUs. The RSUs granted to employees include three - or four-year service periods and vest in equal installments on each anniversary of the date of grant. The RSUs granted to the board of directors include one - or three-year service periods and vest in equal installments on each anniversary of the date of grant. The fair value of the RSUs is equal to the closing price of our common stock on the grant date. A summary of RSUs and related information is as follows: 109 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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 128,661 $ 249.58 Vested ( 40,915 ) $ 214.06 $ 10,190 Forfeited ( 11,356 ) $ 236.30 Unvested at December 31, 2023 201,070 $ 235.47 $ 40,904 Granted 614,219 $ 188.73 Vested ( 83,702 ) $ 234.56 $ 16,261 Forfeited ( 51,682 ) $ 205.57 Unvested at December 31, 2024 679,905 $ 195.63 $ 126,041 Granted 744,258 $ 167.68 Vested ( 258,987 ) $ 200.59 $ 40,753 Forfeited ( 102,985 ) $ 186.89 Unvested at December 31, 2025 1,062,191 $ 175.68 $ 169,186 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 December 31, 2025, the amount of unearned stock-based compensation currently estimated to be expensed from now through the year 2028 related to unvested RSUs is $ 123.5 million which we expect to recognize over a weighted average period of 1.9 years. Performance Stock Units We grant 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 respective three-year periods from the year of grant. The expense is recorded on a straight-line basis over the requisite service periods based on an estimate of the number of PSUs expected to vest. Management expectations related to the achievement of the performance goals associated with PSU grants are assessed each reporting period. The number of shares earned at the end of each of the three-year periods will vary based on actual performance, from 0 % to 200 % of the number of PSUs granted. If the performance conditions are not met or not expected to be met, any compensation expense recognized associated with the grant will be reversed. PSUs are subject to forfeiture in the event of termination other than a termination due to death, disability, or qualifying retirement occurring after the first 12 months of the applicable performance period. Upon such a termination due to death or disability, a prorated amount of the target number of PSUs will accelerate and become fully vested. Upon such a qualifying retirement, a prorated amount of the PSUs will be eligible to vest and settle based on the actual performance achievement in accordance with the original vesting and payment terms applicable to such PSUs. 110 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 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 ( 4,497 ) $ 242.27 Unvested at December 31, 2023 168,969 $ 248.19 $ 34,373 Granted 184,905 $ 196.41 Forfeited ( 30,572 ) $ 224.44 Unvested at December 31, 2024 323,302 $ 220.82 $ 59,934 Granted 236,333 $ 199.70 Vested ( 143,518 ) $ 228.48 $ 26,759 Forfeited (51,078) $ 213.23 Unvested at December 31, 2025 365,039 $ 205.20 $ 58,143 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 December 31, 2025, there was $ 26.2 million of unrecognized stock-based compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 1.4 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 a purchase period. We issued 52,015 shares under the ESPP during 2025 and there were 1,332,425 shares available for future issuance under the ESPP as of December 31, 2025. 7. Income Taxes The components of our provision (benefit) for income taxes are as follows: December 31, 2025 2024 2023 Current Federal $ 3,708 $ — $ — State 4,694 4,103 644 Foreign 624 854 603 Total current 9,026 4,957 1,247 Deferred Federal ( 71,200 ) — — State ( 17,532 ) — — Foreign ( 19 ) ( 13 ) — Total deferred ( 88,751 ) ( 13 ) — Total provision for income taxes $ ( 79,725 ) $ 4,944 $ 1,247 111 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) We adopted ASU No. 2023-09 , Improvements to Income Tax Disclosures in fiscal year 2025 under the prospective method. Under this new standard, we disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold of 5% of the global pretax income. The reconciliation of taxes at the federal statutory rate to our provision for income taxes are as follows for the year ended December 31, 2025: Year Ended December 31, 2025 Amount Percent U.S. federal statutory tax rate $ 13,696 21.0 % State and local income taxes, net of federal income tax effect (1) ( 10,198 ) ( 15.6 ) Foreign tax effects 223 0.3 Tax credits Research and development ("R&D") tax credits ( 5,066 ) ( 7.8 ) Effect of cross-border tax laws (net of foreign tax credits) Foreign-derived intangible income deduction (FDII) ( 776 ) ( 1.2 ) Change in valuation allowance ( 88,137 ) ( 135.1 ) Nontaxable or nondeductible items Stock-based compensation 7,409 11.4 Executive compensation 2,618 4.0 Other 506 0.8 Total provision for income taxes $ ( 79,725 ) ( 122.2 ) % (1) State taxes in Florida, Texas, California, Pennsylvania, Massachusetts, Kentucky, Michigan and South Carolina made up the majority (greater than 50%) of the tax effect in this category. The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Tax at federal statutory rate 21.0 % 21.0 % State, net of federal benefit 6.5 % 4.0 % Stock-based compensation 2.1 % 33.6 % R&D tax credit ( 7.8 ) % 20.6 % Other 2.2 % ( 4.6 ) % Executive compensation 4.0 % ( 16.3 ) % Change in valuation allowance ( 18.9 ) % ( 64.6 ) % Total 9.1 % ( 6.3 ) % Income taxes paid (refunds received) disaggregated by federal, state, foreign taxes are as follows for the year ended December 31, 2025: 112 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) Year Ended December 31, 2025 Federal $ 3,609 State California 535 Other states 3,808 Total state 4,343 Foreign 372 Total income taxes paid $ 8,324 Significant components of net deferred tax assets and liabilities were as follows: Year Ended December 31, 2025 2024 Deferred tax assets: Net operating losses $ 3,972 $ 16,290 R&D tax credits 13,736 12,631 R&D expenditures, capitalized for tax 35,022 38,813 Accruals and other 5,915 4,623 Depreciation — 177 Lease liability 7,872 7,830 Inventory 3,151 1,852 Stock-based compensation 35,871 31,097 Total deferred tax assets 105,539 113,313 Deferred tax liabilities: Depreciation ( 5,245 ) — Lease asset ( 5,761 ) ( 5,742 ) Other comprehensive income ( 169 ) ( 91 ) Total deferred tax liabilities ( 11,175 ) ( 5,833 ) Net deferred tax assets 94,364 107,480 Valuation allowance ( 5,697 ) ( 107,467 ) Total deferred income taxes $ 88,667 $ 13 Deferred income taxes reflect the tax effects of net operating loss carryforwards, tax credit carryforwards, and the net temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2025, we had utilized all of the gross federal net operating loss carryforwards from prior years. We had net operating loss carryforwards for state income tax purposes of $ 60.6 million, which will begin to expire in 2026. We also have gross R&D credit carryforwards of $ 14.7 million as of December 31, 2025 which will expire at various dates beginning in 2034. Utilization of the R&D credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Code and similar state provisions. During the year ended December 31, 2025, we finalized an updated analysis to determine whether an ownership change had occurred 113 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) through December 31, 2024, and if a limitation exists. It was determined that December 11, 2018 was the only date that we experienced an ownership change. The study concluded that none of the $ 126.5 million of federal net operating losses nor the $ 1.7 million of federal R&D credits that were accumulated on December 11, 2018 will expire unused solely due to the limitations under Sections 382 and 383 of the Code. Based on our analysis of all positive and negative evidence available for the year ended December 31, 2025, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that the majority of our U.S. federal and U.S. states net deferred tax assets will be realizable. Accordingly, we have recognized a non-recurring tax benefit of $ 88.8 million for the year ended December 31, 2025. As of December 31, 2025, $ 5.7 million of our valuation allowance remained against certain tax attributes. The valuation allowance decreased by $ 101.7 during the year ended December 31, 2025. On July 4, 2025, the enactment of the One Big Beautiful Bill Act ("OBBBA") into law, marked a significant legislative development, resulting in substantial modifications to the U.S. tax code. The OBBBA influences multiple facets of taxation, including, but not limited to, bonus depreciation, the current-year expensing of research and development costs, and international tax regulations. The income taxes reported for the year ended December 31, 2025 incorporates all relevant tax provisions of this new law. The changes to our gross unrecognized tax benefits were as follows: Year Ended December 31, 2025 2024 2023 Balance beginning of the year $ 146 $ 146 $ 146 Decrease related to the current year ( 40 ) — — Balance end of the year $ 106 $ 146 $ 146 We file income tax returns in the applicable jurisdictions. The 2021 to 2024 tax years remain open to examination by the major taxing authorities to which we are subject. We do no t expect a significant change to our unrecognized tax positions over the next 12 months. Our policy is to record interest related to uncertain tax positions as interest expense and any penalties as other expense in our consolidated statements of operations and comprehensive income (loss). There were no interest or penalties accrued as of December 31, 2025, 2024, or 2023. 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 ("CODM") in deciding how to allocate resources and in assessing performance. Our CODM is the Company's President, Chief Executive Officer, and Chair of the Board of Directors. Reportable segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. Our segment revenues are derived from the sales of our product, the Inspire system, to hospitals and ambulatory surgery centers in the U.S. and in select countries in Europe and the Asia Pacific region. We do not have any intra-entity sales or transfers. Our CODM uses consolidated net income (loss) as the measure of profit or loss. Our CODM assesses performance for the segment and allocates resources and monitors budget versus actual results using consolidated net income (loss) and operating income (loss). The monitoring of budget versus actual results are used in establishing management's compensation. The measure of segment assets is reported on the balance sheet as total consolidated assets. 114 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) Year Ended December 31, 2025 2024 2023 Revenue $ 911,981 $ 802,804 $ 624,799 Less: (a) Cost of goods sold 133,225 122,986 96,576 Research and development expense 103,165 114,128 116,536 Selling, general and administrative expense (excluding advertising expense) 509,712 434,669 351,632 Advertising expense 114,925 94,938 100,326 Operating income (loss) 50,954 36,083 ( 40,271 ) Other income (b) ( 14,743 ) ( 22,370 ) ( 20,365 ) Income taxes ( 79,725 ) 4,944 1,247 Segment net income (loss) 145,422 53,509 ( 21,153 ) Reconciliation of profit or loss Adjustments and reconciling items — — — Consolidated net income (loss) $ 145,422 $ 53,509 $ ( 21,153 ) (a) The significant expense categories and amounts align with the segment-level information that is regularly provided to our chief operating decision maker. (b) Other income represents the consolidated amounts for interest and dividend income, interest expense, and other expense, net, as shown on our consolidated statements of operations and comprehensive income (loss). For the years ended December 31, 2025, 2024, and 2023, depreciation and amortization expense was $ 14.0 million, $ 6.6 million, and $ 2.8 million, respectively, and is included within the segment expense captions of cost of goods sold, research and development expense, and selling, general and administrative expense. For the years ended December 31, 2025, 2024, and 2023, stock-based compensation expense was $ 130.3 million, $ 116.0 million and $ 82.5 million, respectively, and is included within the segment expense captions of cost of goods sold, research and development expense, and selling, general and administrative expense. Revenue by geographic region is as follows: Year Ended December 31, 2025 2024 2023 United States $ 872,086 $ 771,040 $ 606,178 All other countries 39,895 31,764 18,621 Total revenue $ 911,981 $ 802,804 $ 624,799 Long-lived tangible assets by geographic location were as follows: December 31, 2025 2024 United States $ 96,850 $ 71,008 All other countries 1,022 917 Total long-lived tangible assets $ 97,872 $ 71,925 115 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) 9. Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. For the periods presented with a net loss, 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 components of net income (loss) per share are as follows: Year ended December 31, 2025 2024 2023 Numerator: Net income (loss) $ 145,422 $ 53,509 $ ( 21,153 ) Denominator: Weighted average number of common shares outstanding — basic 29,368,892 29,763,395 29,302,154 Dilutive effect of stock options 317,986 594,726 — Dilutive effect of restricted stock units 56,059 79,514 — Dilutive effect of performance stock units 11,480 99,263 — Dilutive effect of shares issuable under the ESPP 2,619 6,376 — Weighted average number of common shares outstanding — diluted 29,757,036 30,543,274 29,302,154 Net income (loss) per share: Basic $ 4.95 $ 1.80 $ ( 0.72 ) Diluted $ 4.89 $ 1.75 $ ( 0.72 ) The following common stock-based awards were excluded from the computation of diluted net income (loss) per common share for the periods presented because including them would have been antidilutive: Year Ended December 31, 2025 2024 2023 Stock options 1,415,769 1,514,718 2,447,141 Restricted stock units 525,088 29,320 201,070 Total 1,940,857 1,544,038 2,648,211 10. Related Party Transaction In December 2023, we entered into an agreement with an entity controlled by our CEO (the "Entity"), pursuant to which we agreed to share the costs of a corporate suite at a sports and entertainment venue (the "Venue") (the “Suite”) (the “Cost Sharing Agreement”). In August 2023, the Entity entered into an agreement with the Venue, pursuant to which the Entity acquired certain rights to use the Suite for specified sporting and other events at the Venue through August 2026. Pursuant to this agreement, the Entity agreed to pay $ 0.2 million per year, with each year beginning September 1 and ending August 31, and the fee increasing by 5 % for each succeeding year. Under the Cost Sharing Agreement, we will reimburse the Entity 50 % of the cost of the Suite in exchange for the right to use the Suite for 50 % of the specified events at the Venue through August 2026. We recognized expense of $ 0.3 million, $ 0.2 million, and $ 0.1 million for the use of the suite in SG&A expense in our consolidated statements of 116 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) operations and comprehensive income (loss) for the years ended December 31, 2025, 2024, and 2023, respectively. 11. Commitments and Contingencies We may from time to time be involved in claims, governmental inquiries or investigations, litigation and other legal proceedings arising in the ordinary course of business, some of which may seek monetary damages, including claims for punitive damages, which may not be covered by insurance. Such matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. We evaluate all matters and record liabilities for losses from legal proceedings when we determine that it is probable that the outcome will be unfavorable and the amount, or potential range, of loss can be reasonably estimated. An adverse determination in one or more of these pending matters could have an adverse effect on our consolidated financial position, results of operations or cash flows. On November 6, 2025, the City of Pontiac Reestablished General Employees’ Retirement System, on behalf of itself and other similarly situated investors, filed a putative securities class action in the United States District Court for the District of Minnesota against the Company and certain of its executive officers, captioned City of Pontiac Reestablished General Employees’ Retirement System v. Inspire Medical Systems, Inc., et al. , Case No. 0:25‑cv‑04247‑PJS‑ECW (D. Minn.) (the “City of Pontiac Lawsuit”). The complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b‑5 promulgated thereunder, based on purportedly materially false and misleading statements made between August 6, 2024, and August 4, 2025, regarding the launch of the Company’s Inspire V neurostimulator. The complaint further alleged that when subsequent disclosures were made concerning issues with the Inspire V launch and the Company announced its third‑quarter fiscal 2025 results, the Company’s stock price declined, purportedly causing investor losses. On December 23, 2025, the plaintiff filed a Notice of Voluntary Dismissal. On December 29, 2025, the case was administratively closed without prejudice. On December 22, 2025, the Indiana Public Retirement System, on behalf of itself and other similarly situated investors, filed a putative securities class action in the United States District Court for the Southern District of New York against the Company and certain of its executive officers, captioned Indiana Public Retirement System v. Inspire Medical Systems, Inc., et al. , Case No. 1:25‑cv‑10620 (S.D.N.Y.) (the “Indiana PRS Lawsuit”). The Indiana PRS Lawsuit arises from the same underlying subject matter as the City of Pontiac Lawsuit. It alleges the same violations of law and is based on the same or similar purportedly materially false and misleading statements made during the same class period, all of which relate to the launch of the Company’s Inspire V neurostimulator. The plaintiffs seek, among other relief, unquantified compensatory damages, together with attorneys’ fees and costs. On January 22, 2026, the Company and the individual defendants moved to transfer the case to the United States District Court for the District of Minnesota. That motion remains pending. The Company and the individual defendants intend to vigorously defend against the action. No accrual for loss has been accrued or recorded in the Company’s financial statements as of, or for the period ended, December 31, 2025 since the Company is unable to determine whether any loss ultimately will occur or to estimate the range of such loss. On January 17, 2025, we received a civil investigative demand (“CID”) from the Department of Justice U.S. Attorney’s Office for the District of Minnesota pursuant to the False Claims Act in the course of the government’s investigation concerning allegations of false claims, including false claims arising from violations of the Anti-Kickback Statute, submitted to government payors in connection with our implant. The CID requests information relating to the marketing, promotion, and reimbursement practices associated with our products. We are cooperating with the investigation. No assurance can be given as to the timing or outcome of the government’s investigation. No amount of loss has been accrued or recorded in the Company’s financial statements as of, or for the period ended, December 31, 2025 since the Company is unable to determine whether any loss ultimately will occur or to estimate the range of such loss. On May 30, 2025, Inspire filed a lawsuit against Nyxoah SA and its subsidiary Nyxoah, Inc. (collectively “Nyxoah”) in the United States District Court for the District of Delaware, alleging that Nyxoah's Genio product infringes on 117 Table of Contents Inspire Medical Systems, Inc. Notes to Consolidated Financial Statements (Table amounts in thousands, except share and per share amounts) certain of Inspire's U.S. patents related to neurostimulation therapy for obstructive sleep apnea. Inspire seeks a judgment of patent infringement and relief for such infringement, including monetary damages such as lost profits. Nyxoah has denied infringement and has asserted counterclaims seeking declaratory judgments of invalidity and non‑infringement. On December 18, 2025, Nyxoah filed three (3) petitions with the United States Patent Trial and Appeal Board seeking inter partes review (IPR) of the three patents asserted by Inspire in the lawsuit. Because these matters are in their early stages, we cannot predict the outcome or estimate the range of potential loss. On September 15, 2025, Nyxoah filed a lawsuit against us in the United States District Court for the District of Delaware alleging that the Inspire IV and Inspire V devices infringe certain of Nyxoah’s patents. The lawsuit is in its early stages. The Company intends to defend the claims in this lawsuit vigorously and believes it has good and substantial defenses to them, but there is no guarantee that the Company will be successful in these efforts. No amount of loss has been accrued or recorded in the Company’s financial statements as of and for the period ended December 31, 2025 since the Company is unable to determine whether any loss ultimately will occur or to estimate the range of such loss. On December 5, 2025, Nyxoah brought suit against Inspire and its wholly-owned subsidiary, Inspire Medical Systems Europe GmbH in the Unified Patent Court, Munich Division, alleging that the Inspire IV implantable neurostimulator infringes a patent owned by Nyxoah. The lawsuit is in its early stages. The Company intends to defend the claims in this lawsuit vigorously and believes it has good and substantial defenses to them, but there is no guarantee that the Company will be successful in these efforts. No amount of loss has been accrued or recorded in the Company’s financial statements as of and for the period ended December 31, 2025 since the Company is unable to determine whether any loss ultimately will occur or to estimate the range of such loss. On January 27, 2026, a stockholder derivative lawsuit was filed in the United States District Court for the Southern District of New York, purportedly on behalf of Inspire against certain of our present and former executive officers and against all current members of the Board of Directors and Inspire (as a nominal defendant), captioned Korte v. Herbert., et al. , Case No. 1:26‑cv‑680 (S.D.N.Y.). The lawsuit arises out of the same subject matter as the Indiana PRS Lawsuit described above and alleges the following claims: (1) Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder; (2) Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; (3) Section 20(a) of the Exchange Act; (4) a common-law claim for breach of fiduciary duty; (5) common-law aiding and abetting; (6) unjust enrichment; and (7) waste of corporate assets. The lawsuit seeks unspecified damages. The Company and the individual defendants intend to vigorously defend against the action. 118 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.