Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part I. "Item 1A. Risk Factors’’ and elsewhere in this Annual Report on Form 10-K.

Overview

We are a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea ("OSA"). Our proprietary Inspire system is the only FDA, European Union ("EU") Medical Devices Regulation ("MDR"), 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. We have developed a novel, closed-loop solution that continuously monitors a patient’s breathing and delivers mild hypoglossal nerve stimulation to maintain an open airway. Inspire therapy is indicated for patients with moderate to severe OSA who do not have significant central sleep apnea and do not have a complete concentric collapse of the airway at the soft palate level.

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

Although our sales and marketing efforts are directed at patients and physicians because they are the primary users of our technology, we consider the hospitals and ASCs where the procedure is performed to be our customers, as they are the purchasing agents of our Inspire system. Our customers are reimbursed according to the coding and correlated payment by various third-party payors, such as commercial payors and government healthcare programs. Our Inspire system is currently covered on a per-patient basis for patients insured by commercial payors, under Local Coverage Determinations for patients insured by Medicare and Medicare Advantage, and under U.S. government contract for patients who are treated by the Veterans Health Administration. As of February 13, 2026, we have secured positive coverage policies with many U.S. commercial payors, including all large national commercial insurers, covering more than 300 million lives in the U.S. In addition, all seven Medicare Administrative Contractors provide coverage of Inspire therapy when certain coverage criteria are met.

Third-party payors require physicians and hospitals to identify the service for which they are seeking reimbursement by using Current Procedural Terminology (“CPT") codes, which are created and maintained by the American Medical Association. Our various generations of Inspire therapy have been billed under different codes and reimbursement approaches throughout our history. For example, the procedures performed to implant our Inspire IV device are described for billing purposes using Category I CPT code 64582. And for 2025, the procedures performed to implant our Inspire V device were described for billing purposes using Category I CPT code 64568. There are also other relevant CPT codes for revisions, explants and DISE.

In November 2025, the final 2026 Medicare reimbursement payments were announced. There has been, and still is currently, confusion on the appropriate reimbursement and coding for our products from CMS and Medicare Administrative Contractors ("MACs"), as well as other payors and stakeholders in the overall reimbursement and coding process. Most recently, we received clarification regarding the coding that should be used for the Inspire V procedure. Currently, healthcare centers and physicians should bill the most recent healthcare policies, be it a Medicare Administrative Contractor (MACs) or a commercial payor, and based on this clarification, we believe the

Table of Contents

code will transition to CPT code 64582 for the Inspire V procedure, including the use of a -52 modifier. To date, our top commercial payers by volume have all adopted the guidance of 64568 for coding and reimbursement of Inspire V. Confusion will remain until there is definitive and public guidance from various stakeholders and we have sufficient claims data that has been submitted and processed across payers. The resulting coding and reimbursement decisions may impact our business, financial condition and results of operations, in particular our future revenues. We continue to work with the relevant stakeholders to get specific and accurate direction for Inspire V coding, including the -52 modifier that we would expect to reduce the professional fee for Inspire V procedures under CPT code 64582 by approximately 10% to 50% of the base rate. In any case, we believe that a significant decrease in the professional fee resulting from use of the –52 modifier will likely influence physicians’ willingness to perform the Inspire V procedure and may limit the number of cases they choose to undertake. Beyond our short-term initiatives intended to minimize the actual reduction applied to the professional fee, as well as to drive consistency across the country, we are seeking a long-term solution, including the creation of a separate CPT code. There can be no guarantee as to the timing or outcome of the CPT code to be applied.

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

For the year ended December 31, 2025, 95.6% of our revenue was derived in the U.S. and 4.4% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue.

We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers. Currently, all of our manufacturing is done in the U.S. and most components for our Inspire system are sourced in the U.S. We have experienced supply disruptions in the past.

We typically seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges. For example, during 2025, we recorded a charge of $2.1 million for excess component parts related to our Inspire IV system.

Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock. We have devoted significant resources to research and development activities related to our Inspire system, including clinical and regulatory initiatives to obtain marketing approval, and sales and marketing activities. For the year ended December 31, 2025, we generated revenue of $912.0 million with a gross margin of 85.4% and net income of $145.4 million, compared to revenue of $802.8 million with a gross margin of 84.7% and net income of $53.5 million for the year ended December 31, 2024, and revenue of $624.8 million with a gross margin of 84.5% and a net loss of $21.2 million for the year ended December 31, 2023. Our accumulated deficit as of December 31, 2025 was $146.5 million.

We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions. We continue to make investments in research and development efforts to develop our future generations of Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as additional European countries and the Asia Pacific region. For example, in August 2024, we received approval from the FDA for our Inspire V neurostimulator ("Inspire V,") which we began to market for sale in the U.S. in May 2025.

Since 2023, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, has continued to gain popularity as a weight-loss drug. In late 2024, tirzepatide (marketed as Zepbound), a GLP-1 injection which was FDA approved for weight loss in 2023, was also FDA approved for treatment of OSA in patients with obesity and moderate to severe OSA. If GLP-1s are used to treat OSA in an indication for which Inspire therapy is approved, demand for our Inspire system for patients with that indication could be reduced. OSA is a multifactorial disease with many independent factors including age, gender, weight, and neck circumference. Inspire is designed to address antero-posterior airway collapse, also known as tongue base collapse. In contrast, patients with a higher BMI are subject to a larger neck circumference and present predominantly with lateral-wall collapse.

Table of Contents

A combination of tongue base collapse and lateral wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse. In 2024, Eli Lilly and Company ("Lilly") published results from its SURMOUNT-OSA trial demonstrating a 50.7% reduction in Apnea-Hypopnea Index ("AHI") for patients in the therapy arm of the study using tirzepatide, and that 43% of participants treated with tirzepatide at the highest dose met criteria for disease resolution. In this context, "disease resolution" means achieving an AHI of fewer than 5 events per hour, or an AHI of 5 to 14 events per hour and an Epworth Sleepiness Scale ("ESS") score of ≤10. ESS is a standard questionnaire designed to assess excessive daytime sleepiness. Given a baseline AHI of 50.3, and based on these results, we believe that most patients enrolled in the study will continue to have residual moderate to severe OSA that will require treatment and fall within Inspire’s FDA-approved indication. While weight loss may help reduce a patient’s AHI and other OSA symptoms, numerous other studies have shown that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue base collapse. Based on our ongoing ADHERE patient registry, the average BMI of patients treated with Inspire therapy is 29. The American Academy of Sleep Medicine guidelines recommend weight loss prior to surgery for patients with BMI over 35 and nonsurgical solutions for patients with BMI over 40. In October 2025, we conducted a survey of over 200 sleep physicians to better understand their treatment paradigm for OSA since the introduction of GLP-1s. The survey findings suggest that some physicians will prescribe a GLP-1 to patients prior to considering Inspire therapy. The survey findings also suggest that, with the availability of GLP-1s to treat OSA, the number of patients seeking diagnosis and treatment for OSA is increasing. We believe that some of these patients will see a reduction in their BMI into our indication, and that some of those patients will not have their OSA fully resolved and will require further treatment. This reinforces our belief that the overall number of patients eligible for Inspire therapy will increase in the long-term due to the availability of GLP-1s, although there can be no assurance of such benefit at this time.

Macroeconomic Environment

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

Components of Our Results of Operations

Revenue

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

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

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

Table of Contents

Cost of Goods Sold and Gross Margin

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

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

Research and Development Expenses

Research and development ("R&D") expenses consist primarily of product development, engineering, clinical studies to develop and support our products, regulatory expenses, quality assurance, testing, consulting services, prelaunch inventory, and other costs associated with the next generation versions of the Inspire system and SleepSyncTM, a cloud-based patient management system. These expenses include employee compensation, including stock-based compensation, supplies, materials, consulting, and travel expenses related to research and development programs. Additionally, these expenses include clinical study management, payments to clinical investigators, data management and travel expenses for our various clinical studies.

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

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

Selling, General and Administrative Expenses

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

We expect SG&A expenses to continue to increase as we expand our commercial infrastructure to both drive and support our planned growth in revenue and as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance, legal, and human resources personnel

Table of Contents

and information technology services. Additionally, we anticipate an increase in our stock-based compensation expense with grants of restricted stock units, performance stock units, and shares of our common stock purchased pursuant to our employee stock purchase plan.

Other Income, Net

Other income, net consists primarily of interest and dividend income, minimal interest expense, the impacts of foreign currency transactions and remeasurements, gains and losses on investments, and an impairment charge related to a strategic investment.

Results of Operations

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Year Ended December 31, Change

(in thousands, except percentages)

Operating expenses:

Revenue

Revenue increased $109.2 million, or 13.6%, to $912.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was attributable to a $101.0 million increase in sales of our Inspire system in the U.S and an increase of $8.1 million outside of the U.S. Overall revenue growth was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints and some U.S. patients and physicians delaying Inspire therapy until Inspire V is available at their location or while they trial GLP-1 medications.

Revenue information by region is summarized as follows:

Year Ended December 31,

Amount % of Revenue Amount % of Revenue $ %

(in thousands, except percentages)

Table of Contents

Revenue generated in the U.S. was $872.1 million for the year ended December 31, 2025, an increase of $101.0 million, or 13.1%, over the year ended December 31, 2024. Revenue growth in the U.S. was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints and some patients and physicians delaying Inspire therapy until Inspire V is available at their location or while they trial GLP-1 medications.

Revenue generated outside of the U.S. was $39.9 million in the year ended December 31, 2025, an increase of $8.1 million, or 25.6%, over the year ended December 31, 2024. Revenue growth outside the U.S. was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system.

Cost of Goods Sold and Gross Margin

Cost of goods sold increased $10.2 million, or 8.3%, to $133.2 million for the year ended December 31, 2025 compared to $123.0 million for the year ended December 31, 2024. The increase was primarily due to product costs associated with the higher sales volume of our Inspire system, and to a lesser extent, the $2.1 million charge associated with excess components related to Inspire IV.

Gross margin was 85.4% for the year ended December 31, 2025 compared to 84.7% for the year ended December 31, 2024. This increase was primarily due to increased sales volume as well as increased sales mix of the Inspire V system, which is less expensive to manufacture and therefore has a higher gross margin than the Inspire IV system, partially offset by the excess inventory component charge discussed above.

Research and Development Expenses

Research and development expenses decreased $11.0 million, or 9.6%, to $103.2 million for the year ended December 31, 2025 compared to $114.1 million for the year ended December 31, 2024. This change was primarily due to a decrease of $12.6 million in ongoing research and development costs, primarily with respect to our next generation versions of the Inspire neurostimulator, our SleepSyncTM programmer, and our SleepSyncTM platform, and an increase in costs allocated to cost of good sold and inventory of $12.7 million, partially offset by an increase of $14.0 million in compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and an increase of $0.3 million in regulatory submissions and clinical studies expenses and quality compliance fees.

Selling, General and Administrative Expenses

SG&A expenses increased $95.0 million, or 17.9%, to $624.6 million for the year ended December 31, 2025 compared to $529.6 million for the year ended December 31, 2024. The primary driver of this change was an increase of $51.1 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount. In addition, marketing costs increased $33.0 million, mainly for advertising, and general corporate costs increased $7.0 million, primarily due to legal fees, depreciation expense, computer equipment and software expense, and consulting fees. Also contributing to the increase were travel expenses, which increased by $3.9 million.

Other Income, Net

Other income, net decreased by $7.6 million, or 34.1%, to $14.7 million of income for the year ended December 31, 2025 compared to $22.4 million of income for the year ended December 31, 2024. This change was primarily due to an decrease of $5.7 million in interest and dividend income due to lower cash, cash equivalents, and investment balances, an impairment charge of $4.0 million on one of our strategic investments, and an increase of $0.1 million in interest expense, partially offset by an increase of $2.2 million in foreign currency translation and remeasurement gains due to exchange rates.

Table of Contents

Income Taxes

We recorded a total income tax benefit of $79.7 million for the year ended December 31, 2025 and $4.9 million of expense for the year ended December 31, 2024. The provision for income taxes for fiscal 2025 includes a deferred tax benefit of $88.8 million related to the release of the valuation allowance against our net deferred tax assets, partially offset by current income tax expense of $9.1 million, which reflects federal and state income tax liabilities that are not fully offset by NOLs and credits due to limitations on net operating loss carryforwards and credits under the Internal Revenue Code of 1986, as amended. We expect that we will record income tax expense in 2026 and beyond as we expect to continue to generate additional taxable income for the foreseeable future.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

For a discussion of our results of operations for the year ended December 31, 2024, including a year-to-year comparison between 2024 and 2023, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Liquidity and Capital Resources

We believe our balance sheet and liquidity as of February 13, 2026 provides us with flexibility, and that our cash, cash equivalents, and investments will satisfy our operating needs and capital expenditures for at least the next 12 months.

Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning processes. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, property, plant, and equipment, and other operating costs. Our sources of capital include sales of our Inspire system and registered offerings of our common stock.

As of December 31, 2025, we had cash, cash equivalents and available-for-sale debt securities of $404.6 million, a decrease of $111.9 million from $516.5 million as of December 31, 2024. Working capital totaled $487.6 million as of December 31, 2025, a decrease of $54.7 million from December 31, 2024. We define working capital as current assets less current liabilities. The decrease in working capital was primarily due to the following factors:

•a decrease of $137.3 million in cash and cash equivalents and short-term available for sale investments primarily due to $175.0 million of share repurchases made under our share repurchase programs, as well as inventory purchases and the payment of taxes on net share settlements of equity awards, partially offset by proceeds from sales of the Inspire system, proceeds from the exercise of stock options, interest and dividend income, and the increase in long-term available for sale investments;

•an increase of $9.7 million in accrued expenses which increased primarily due to compensation and personnel-related costs; and

•a decrease of $1.7 million in prepaid expense and other current assets which increased primarily due to increases in miscellaneous receivables and interest income receivable.

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

•an increase of $65.2 million in inventory balances, as we increased inventory levels to support higher sales and the launch of Inspire V;

•an increase of $26.6 million in accounts receivable due to higher sales which occurred late in the fourth quarter of 2025; and

•a decrease of $2.1 million in accounts payable.

Table of Contents

risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. At December 31, 2025, we had $159.8 million in U.S. Treasury debt securities, $116.7 in corporate debt securities, $64.4 million in money market funds, and $23.3 million in commercial paper and asset-asset-backed securities. See Note 2 to our Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional information on our investments.

In 2025, our SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during 2026. Our SG&A expenditures, primarily for increasing headcount and advertising, may exceed any associated increases in revenues, and therefore would reduce our cash flow from operations. We also anticipate R&D expenses will increase during 2026, primarily related to the ongoing development of the SleepSyncTM platform and next generation products.

We spent $38.5 million on purchases of property and equipment in 2025, mainly on manufacturing equipment and tooling for Inspire V, development of our SleepSyncTM platform, and computer hardware and software. We anticipate further capital expenditures in 2026, primarily for additional manufacturing equipment and our SleepSyncTM platform, computer hardware and software, and leasehold improvements on our corporate office buildings.

We believe that our existing cash and cash equivalents and available for sale investments, which totaled $404.6 million as of December 31, 2025, together with cash flows from operations, will provide sufficient liquidity to meet our cash needs and fund our operations and planned capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will continue to generate cash flows at the same levels achieved in prior periods.

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

Below is a summary of short-term and long-term anticipated cash requirements under contractual obligations existing as of December 31, 2025.

($ in thousands) Total Fiscal 2026 After Fiscal 2026

Recorded contractual obligations:

Unrecorded contractual obligations:

(1) See Note 3 to our Consolidated Financial Statements included elsewhere in this Form 10-K.

(2) Primarily purchase obligations to suppliers for inventory.

As of December 31, 2025, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Table of Contents

Repurchase Programs

See section titled “Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Part II, Item 5 of this report for a discussion of our share repurchase program and related stock repurchases during the quarter ended December 31, 2025 as well as Note 5 to our Consolidated Financial Statements included elsewhere in this Form 10-K.

Cash Flows

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

Year Ended December 31,

(in thousands)

Net cash provided by (used in):

Effect of exchange rate on cash (310) (118)

Decrease in cash and cash equivalents $ (45,337) $ (35,387)

Operating Activities

Net cash provided by operating activities was $117.0 million for 2025 and consisted of net income of $145.4 million, non-cash charges of $58.9 million, and a decrease in net operating assets of $87.4 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of the accelerated recognition of stock-based compensation expense for employees who are retirement eligible in accordance with 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, and granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included the recognition of a deferred tax benefit, depreciation and amortization expense which increased with additional purchases of property and equipment, an impairment of a strategic investment, accretion of investment discount on our available-for-sale investments, a change in the provision for estimated credit losses, and other, net. Operating assets include inventories, which increased as we continue to build inventory levels to support higher sales and the launch of Inspire V, and accounts receivable, which increased primarily due to higher sales which occurred during September 2025. Operating assets also include prepaid expenses and other current assets which increased slightly. Operating liabilities include accounts payable, which increased generally due to the timing of vendor invoice payments, and accrued expenses, which increased slightly.

Net cash provided by operating activities was $130.2 million for 2024 and consisted of net income of $53.5 million, non-cash charges of $114.4 million, and a decrease in net operating assets of $37.7 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior year period. The remainder of the non-cash charges included accretion of investment discount due to higher investment balances, depreciation and amortization expense which increased with additional purchases of property and equipment, the benefit for estimated credit losses related primarily to accounts receivable with two healthcare systems, and other non-cash expenses. Operating assets include inventories, which increased as supply chain constraints continued to ease and inventory on hand increased to support higher sales and the launch of Inspire V neurostimulator, and accounts receivable, which increased due to the higher sales volume we typically experience late in the fourth quarter. Operating assets also include prepaid expenses and other current assets, which increased primarily due to miscellaneous receivables and interest income receivable on our higher investment balances. Operating liabilities include accrued expenses which increased primarily due to compensation and personnel-related costs, and accounts payable.

Table of Contents

Investing Activities

Net cash provided by investing activities for 2025 was $21.4 million and consisted primarily of proceeds from sales or maturities of investments of $310.4 million, partially offset by the purchase of investments of $240.3 million, the purchase of strategic investments of $10.1 million and purchases of property and equipment of $38.5 million, mainly on manufacturing equipment and tooling for Inspire V, development of our SleepSyncTM platform, and computer hardware and software.

Net cash used in investing activities for 2024 was $113.1 million and consisted primarily of the purchase of investments of $418.4 million, partially offset by $344.6 million of proceeds from sales or maturities of investments. Investing activities also included purchases of property and equipment of $39.1 million, mainly for testing systems and manufacturing equipment for our next generation Inspire system, our SleepSyncTM platform, computer hardware and software, and leasehold improvements. We also purchased strategic investments of $0.3 million.

Financing Activities

Net cash used in financing activities was $183.4 million for 2025 and consisted primarily of share repurchases of $175.0 million under our share repurchase authorizations and the payment of $23.0 million of taxes paid on net share settlement of equity awards, partially offset by proceeds from the exercise of stock options of $9.6 million and proceeds from the issuance of common stock from our Employee Stock Purchase Plan ("ESPP") of $5.0 million.

Net cash used in financing activities was $52.4 million for 2024 and consisted primarily of a $75.0 million payment for our ASR agreement and $5.2 million of taxes paid on net share settlement of equity awards, partially offset by proceeds from the exercise of stock options of $22.2 million and proceeds from the issuance of common stock from our ESPP of $5.6 million.

Critical Accounting Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the audited financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. We believe that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the audited financial statements. Actual results could differ from these estimates.

The following areas require management estimates, assumptions, and judgments:

Inventories

Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first out basis. We estimate the recoverability of our inventory by reference to internal estimates of future demands, introduction of new products, and product life cycles, including expiration of inventory prior to sale. 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. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the carrying value of our inventories and reported operating results. Likewise, the timing of FDA approval of a next generation product, if granted, and the associated commercial launch, could have a significant impact on the carrying value of the inventory of our previous generation product, and therefore our reported operating results. The net inventory balance was $145.3 million and $80.1 million as of December 31, 2025 and 2024, respectively. The reserve for excess and obsolete inventory was $1.3 million and $1.0 million as of December 31, 2025 and 2024, respectively.

Table of Contents

Stock-Based Compensation

We maintain an equity incentive plan to provide long-term incentives for eligible employees, consultants, and members of the board of directors. The plan allows for the issuance of performance stock units ("PSUs") which we grant to officers and key employees. The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals for the three-year fiscal year periods from the date of grant. Management expectations related to the achievement of the performance goals associated with PSU grants is assessed each reporting period, which determines the amount of stock-based compensation expense recorded during the period. The number of shares earned at the end of the three-year periods will vary based on actual performance, from 0% to 200% of the number of PSUs granted. If the performance goals are not met, no shares will be earned. If 200% of the PSUs outstanding as of December 31, 2025 are ultimately earned, the total stock-based compensation expense recognized over the next two-year period ending December 31, 2027 will be $92.9 million. If the performance conditions are not met or not expected to be met, any compensation expense previously recognized associated with the grant will be reversed which will impact our operating results.

Income Taxes

Prior to December 31, 2025, we maintained a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements. This valuation allowance reflected our assessment of whether it is more likely than not that we would generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets, and we considered cumulative losses in recent years to be a significant type of negative evidence. As of December 31, 2025, we determined that it is more-likely-than-not that a majority of our federal and 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 state deferred tax assets, and we recorded a deferred income tax benefit in the amount of $88.8 million for the year ended December 31, 2025 (see Note 7 to our Consolidated Financial Statements included elsewhere in this Form 10-K). We utilize 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 net deferred tax assets. Changes in our valuation allowance will result in a change to tax expense.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our Consolidated Financial Statements contained elsewhere in this Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The risk associated with fluctuating interest rates is primarily limited to our cash equivalents which are carried at quoted market prices and our short-term investments. We do not currently use or plan to use financial derivatives in our investment portfolio. A hypothetical 1% change in interest rates would have impacted interest and dividend income on our consolidated financial statements by approximately $3.8 million and $3.6 million for the years ended December 31, 2025 and 2024, respectively.

Credit Risk

As of December 31, 2025 and 2024, our cash, cash equivalents, and investments were maintained with financial institutions which we believe have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us, however our cash balances were in excess of insured limits. Market

Table of Contents

conditions can impact the financial stability of institutions where our cash is held and in the event of a failure, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. 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. See Note 2 of our Consolidated Financial Statements included elsewhere in this Form 10-K for additional information on our cash equivalents and available-for-sale marketable securities.

Our accounts receivable primarily relate to revenue from the sales of our Inspire system to hospitals and ASCs in the U.S. and Europe. We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and the broad diversification of our customer base. We generally do not require collateral, and losses on accounts receivable have historically not been significant. No single customer represented more than 10% of our accounts receivable as of December 31, 2025 or 2024.

Foreign Currency Risk

The majority of our business is currently conducted in U.S. dollars. Any transactions that may be conducted in foreign currencies are not expected to have a material effect on our results of operations, financial position or cash flows.

Inflation Risk

Inflationary factors, such as increases in our cost of goods sold and selling and operating expenses, may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin and selling and marketing and operating expenses as a percentage of our revenue if the selling prices of our products do not increase as much as or more than these increased costs.

Table of Contents

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.

Table of Contents

Reserves for excess and obsolete inventory

/s/Ernst & Young LLP

We have served as the Company's auditor since 2015.

Minneapolis, Minnesota

February 13, 2026

Table of Contents

Inspire Medical Systems, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 10,399 12,074

Liabilities and stockholders' equity

Current liabilities:

Operating lease liabilities, non-current portion 29,998 30,039

Other non-current liabilities 104 148

Commitments and contingencies (Note 11)

Stockholders' equity

Accumulated other comprehensive income 464 536

Total liabilities and stockholders' equity $ 907,317 $ 808,383

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

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,

Operating expenses:

Other expense (income):

Other comprehensive income (loss):

Foreign currency translation (loss) gain (296) (65) 140

Unrealized gain (loss) on investments 224 (199) 746

Net income (loss) per share:

Weighted average shares outstanding:

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

Table of Contents

Inspire Medical Systems, Inc.

Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

Common Stock

Vesting of restricted stock units 40,915 — — — — —

Stock-based compensation expense — — 82,470 — — 82,470

Other comprehensive income — — — 886 — 886

Vesting of restricted stock units, net 57,824 — (4,895) — — (4,895)

Other comprehensive loss — — — (264) — (264)

Accelerated share repurchase of common stock (103,886) — — — — —

Other comprehensive income — — — (72) — (72)

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

Table of Contents

Inspire Medical Systems, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Operating activities

Adjustments to reconcile net income (loss):

Deferred income taxes (benefit) (88,749) — —

Provision (benefit) for estimated credit losses 200 (768) 1,612

Impairment of strategic investment 4,046 — —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 1,651 (2,344) (4,758)

Investing activities

Financing activities

Accelerated share repurchase of common stock — (75,000) —

Share repurchase of common stock (175,019) — —

Effect of exchange rate on cash (310) (118) 164

Supplemental cash flow information

Cash paid for interest $ 137 $ 22 $ —

Excise taxes accrued but not paid 1,004 — —

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

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

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:

Amortized Unrealized Gross Aggregate

Cost Gains Losses Fair Value

Short-Term:

Long-Term:

Amortized Unrealized Gross Aggregate

Cost Gains Losses Fair Value

Short-Term:

Long-Term:

Asset-backed securities 287 — — 287

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:

Table of Contents

Inspire Medical Systems, Inc.

Notes to Consolidated Financial Statements

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

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)

Less than 12 Months 12 Months or Greater Total

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

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.

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

EstimatedFair Value Level 1 Level 2 Level 3

Cash equivalents:

Investments:

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

EstimatedFair Value Level 1 Level 2 Level 3

Cash equivalents:

Investments:

Asset-backed securities 287 — 287 —

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-

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,

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) —

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,

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,

Less: accumulated depreciation and amortization (25,650) (13,758)

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,

Product warranty liability 587 933

Operating lease liabilities, current portion 2,157 1,754

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

Year Ended December 31,

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.

Stock-Based Compensation

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

We recognize equity-based compensation expense for awards of equity instruments based on the grant date fair value of those awards as expense in the consolidated statements of operations and comprehensive 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.

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,

Right-of-use assets:

Operating lease right-of-use assets $ 23,532 $ 23,314

Operating lease liabilities:

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,

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:

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,

Assumptions:

Expected term (years) 6.25 6.25

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

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)

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:

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,

Current

Federal $ 3,708 $ — $ —

Deferred

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,

Amount Percent

U.S. federal statutory tax rate $ 13,696 21.0 %

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

Executive compensation 2,618 4.0

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,

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 %

Executive compensation 4.0 % (16.3) %

Change in valuation allowance (18.9) % (64.6) %

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,

State

Total income taxes paid $ 8,324

Significant components of net deferred tax assets and liabilities were as follows:

Year Ended December 31,

Deferred tax assets:

R&D expenditures, capitalized for tax 35,022 38,813

Depreciation — 177

Deferred tax liabilities:

Depreciation (5,245) —

Other comprehensive income (169) (91)

Total deferred tax liabilities (11,175) (5,833)

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,

Balance beginning of the year $ 146 $ 146 $ 146

Decrease related to the current year (40) — —

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 not 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,

Less: (a)

Reconciliation of profit or loss

Adjustments and reconciling items — — —

(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,

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

December 31,

115

Table of Contents

Inspire Medical Systems, Inc.

Notes to Consolidated Financial Statements

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

INSP US Equity

INSP · 10-K · period ended 2025-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

INSP US Equity☆

INSP · 10-K · period ended 2025-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

INSP US Equity