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Inspire Medical Systems, Inc. (INSP)

CIK: 0001609550. SIC: 3841 Surgical & Medical Instruments & Apparatus. Latest 10-K as of: 2026-02-13.

SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3841 Surgical & Medical Instruments & Apparatus

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1609550. Latest filing source: 0001609550-26-000016.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue911,981,000USD20252026-02-13
Net income145,422,000USD20252026-02-13
Assets907,317,000USD20252026-02-13

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001609550.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric2016201720182019202020212022202320242025
Revenue50,593,00082,050,000115,381,000233,394,000407,856,000624,799,000802,804,000911,981,000
Net income-17,511,000-21,828,000-33,243,000-57,203,000-42,042,000-44,881,000-21,153,00053,509,000145,422,000
Operating income-16,003,000-20,378,000-34,897,000-56,208,000-39,850,000-47,592,000-40,271,00036,083,00050,954,000
Gross profit22,549,00040,537,00068,407,00097,758,000200,115,000341,741,000528,223,000679,818,000778,756,000
Diluted EPS-1.40-2.19-1.54-1.60-0.721.754.89
Assets200,080,000181,253,000281,189,000295,084,000564,876,000676,811,000808,383,000907,317,000
Liabilities36,081,00041,418,00051,442,00066,036,00068,868,000104,297,000118,688,000126,157,000
Stockholders' equity-6,608,0001,327,000163,999,000139,835,000229,747,000229,048,000496,008,000572,514,000689,695,000781,160,000
Cash and cash equivalents97,288,00022,860,000190,518,000214,467,000441,592,000185,537,000150,150,000104,813,000
Net margin-43.14%-40.52%-49.58%-18.01%-11.00%-3.39%6.67%15.95%
Operating margin-40.28%-42.53%-48.72%-17.07%-11.67%-6.45%4.49%5.59%

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-04. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001609550.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2022-Q22022-06-30-0.53reported discrete quarter
2022-Q32022-09-30-0.60reported discrete quarter
2023-Q22023-03-31-15,424,000reported discrete quarter
2023-Q12023-03-31-15,424,000-0.53reported discrete quarter
2023-Q22023-06-30151,092,000-0.41reported discrete quarter
2023-Q32023-06-30-11,952,000reported discrete quarter
2023-Q32023-09-30153,302,000-0.29reported discrete quarter
2023-Q42023-12-31192,508,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-03-31164,010,000-10,005,000-0.34reported discrete quarter
2024-Q22024-03-31-10,005,000reported discrete quarter
2024-Q32024-06-309,793,000reported discrete quarter
2024-Q22024-06-30195,885,0000.32reported discrete quarter
2024-Q32024-09-30203,191,0000.60reported discrete quarter
2024-Q42024-12-31239,718,00035,224,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-31201,317,0002,992,0000.10reported discrete quarter
2025-Q22025-03-312,992,000reported discrete quarter
2025-Q32025-06-30-3,592,000reported discrete quarter
2025-Q22025-06-30217,086,000-0.12reported discrete quarter
2025-Q32025-09-30224,501,0000.34reported discrete quarter
2025-Q42025-12-31269,077,000136,090,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-31204,583,000-11,294,000-0.39reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001609550-26-000023.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-04. Report date: 2026-03-31.

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, the discussion under "Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 1. Business” sections included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, such as information with respect to our plans and strategy for our business and the impact of macroeconomic factors on our business, financial results and financial condition includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the "Part I, Item 1A. Risk Factors" section of our Annual Report and in the "Part I, Item 1A "Risk Factors" section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea (OSA). Our proprietary Inspire system is the first 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.

Seasonality

Historically, we have experienced seasonality in our first and fourth fiscal quarters, and we expect this trend to continue. In the U.S., we have experienced, and may in the future experience, higher sales in the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs. Conversely, in the first quarter, many U.S. patients' insurance deductibles reset, requiring more out-of-pocket costs, which negatively impacts our sales during this period.

Recent Developments

Coding and Reimbursement

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. In November 2025, the final 2026 Medicare reimbursement payments were announced. Since this announcement, there has been, and still is currently, significant uncertainty and changes directly and indirectly relating to the appropriate coding and reimbursement for our Inspire V therapy from CMS and Medicare Administrative Contractors (MACs), as well as other payors and stakeholders in the overall coding and reimbursement process.

Most recently, in April 2026 the American Hospital Association (AHA) recommended use of CPT code 64999 for Inspire V commercial cases. CPT code 64999 is an unlisted procedure code for the nervous system and is to be used when no specific CPT code exists to accurately describe a service. Because CPT code 64999 is non‑specific, reimbursement determinations typically required additional supporting documentation, which may result in increased claims review and processing time (in which case we will provide additional education and support to customers). The AHA's quarterly newsletter that included this recommendation indicates that its guidance does not dictate coverage and reimbursement policy as determined by local Medicare contractors or any other payer; nor is it a substitution for the judgment of a qualified practitioner in the application of HCPCS codes. Currently, many

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commercial policies still publish CPT code 64568 as the code to be used for the Inspire V procedure. As a result, Inspire continues to recommend that providers consider using the code listed in the applicable payer policy (recognizing that the payer policies may not reflect current coding guidance) and consult their provider's own compliance, coding advisors, and payers as needed.

In terms of Inspire V Medicare cases, in February 2026, the Centers for Medicare & Medicaid Services (CMS) announced that it would implement a series of HCPCS Level II C‑codes which were published on April 1, 2026. These C‑codes apply only to facility billing and do not address professional (or physician) fee reimbursement. We currently believe all Medicare Administrative Contractor (MAC) local coverage determinations identify CPT code 64582 as the appropriate code. In addition, based on information provided to us, most procedures billed year‑to‑date have been submitted and paid without the use of a modifier. Accordingly, we believe it is appropriate for providers to continue billing CPT code 64582 without a modifier. However, it is important to note that MACs may, in the future, require the use of a modifier for these services, which could affect professional fee reimbursement.

These and other recent coding and reimbursement decisions (particularly the uncertainty of the decisions and volatility of the announcements from multiple stakeholders) have adversely impacted our revenue in the first quarter and we anticipate that this will continue to adversely impact revenue during 2026. Inspire is actively engaging with relevant stakeholders regarding the reimbursement uncertainty affecting Inspire V and is providing support as appropriate - with a goal of limiting and moving past the uncertainty as soon as possible. In the short-term, we are working to minimize potential delays and continue to support patient access to therapy. This includes providing proactive education and assistance to our field team, our customers and physicians. We are also 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 application.

In addition, the Wasteful and Inappropriate Service Reduction Model (WISeR) program, which is a government initiative requiring prior authorization of Medicare cases in six pilot states, began in mid-January 2026. During the first quarter, we experienced delays due to the new WISeR requirements for traditional Medicare procedures in the six WISeR states which adversely impacted our revenue in the first quarter. We anticipate that this will continue to adversely impact revenue for the remainder of 2026.

Commercial Organization

We continue to make significant investments in our sales and marketing organization. In 2025, we began optimizing our sales model through targeted territory consolidation and increased field clinical representatives (FCRs). This enables territory managers to focus on therapy awareness, surgeon recruiting and training, and driving the adoption of Inspire therapy, while FCRs provide technical and clinical expertise as well as educational and field support. As of March 31, 2026, we had 284 U.S. sales territories and 288 field clinical representatives, as compared with 295 U.S. sales territories and 275 field clinical representatives as of December 31, 2025.

GLP-1s

Since 2023, glucagon-like peptide 1 (GLP-1s), a class of drug initially indicated for diabetes and obesity, has continued to gain popularity as a weight-loss drug. In 2024, tirzepatide (marketed as Zepbound), a GLP-1 injection was 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 delayed or reduced. In late 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. However, in the short-term we currently believe our revenue is being adversely impacted by the increasing prevalence and adoption of GLP-1s.

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Macroeconomic Environment

As a global company, our business is subject to local and international macroeconomic trends as well as geopolitical factors. Continued uncertainty around inflationary pressures, interest rates, regulatory changes (including changes to government funding of entitlement programs and changes to contain health care costs), foreign currency fluctuations, global trade policies and changes in tax laws, as well as actions by governments in response thereto, could create economic challenges which could negatively impact our business and results of operations. Further, geopolitical developments and uncertainties, including related to various ongoing global conflicts and tensions, may also create economic, supply chain, transportation, energy, and other financial or operational challenges, including disruptions to our suppliers or our customers' operations, which could negatively impact our business and results of operations.

Components of Our Results of Operations

There have been no material changes in market risk from those described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

Results of Operations

Three Months Ended

March 31,

% of Revenue

2026

2025

$ Change

% Change

2026

2025

(in thousands, except percentages)

Revenue

$

204,583 

$

201,317 

$

3,266 

1.6 

%

100.0 

%

100.0 

%

Cost of goods sold

27,671 

30,709 

(3,038)

(9.9)

%

13.5 

%

15.3 

%

Gross profit

176,912 

170,608 

6,304 

3.7 

%

86.5 

%

84.7 

%

Operating expenses:

Research and development

25,826 

27,803 

(1,977)

(7.1)

%

12.6 

%

13.8 

%

Selling, general and administrative

152,204 

144,290 

7,914 

5.5 

%

74.4 

%

71.7 

%

Total operating expenses

178,030 

172,093 

5,937 

3.4 

%

87.0 

%

85.5 

%

Operating (loss)

(1,118)

(1,485)

367 

(24.7)

%

(0.5)

%

(0.7)

%

Other (income), net

(3,515)

(5,644)

2,129 

(37.7)

%

(1.7)

%

(2.8)

%

Earnings before income taxes

2,397 

4,159 

(1,762)

(42.4)

%

1.2 

%

2.1 

%

Income tax expense

13,691 

1,167 

12,524 

1,073.2 

%

6.7 

%

0.6 

%

Net (loss) earnings

$

(11,294)

$

2,992 

$

(14,286)

(477.5)

%

(5.5)

%

1.5 

%

Effective tax rate

571.2%

28.1%

Revenue information by region is summarized as follows:

Three Months Ended March 31,

2026

2025

Change

Amount

% of Revenue

Amount

% of Revenue

$

%

(in thousands, except percentage

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-13. Report date: 2025-12-31.

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

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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.

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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.

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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 SleepSync™, 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 SleepSync™ 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

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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

2025

2024

$

%

(in thousands, except percentages)

Revenue

$

911,981 

$

802,804 

$

109,177 

13.6 

%

Cost of goods sold

133,225 

122,986 

10,239 

8.3 

%

Gross profit

778,756 

679,818 

98,938 

14.6 

%

Gross margin

85.4 

%

84.7 

%

Operating expenses:

Research and development

103,165 

114,128 

(10,963)

(9.6)

%

Selling, general and administrative

624,637 

529,607 

95,030 

17.9 

%

Total operating expenses

727,802 

643,735 

84,067 

13.1 

%

Operating income

50,954 

36,083 

14,871 

41.2 

%

Other income, net

(14,743)

(22,370)

7,627 

(34.1)

%

Income before income taxes

65,697 

58,453 

7,244 

12.4 

%

Income taxes

(79,725)

4,944 

(84,669)

(1712.6)

%

Net income

$

145,422 

$

53,509 

$

91,913 

171.8 

%

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,

2025

2024

Change

Amount

% of Revenue

Amount

% of Revenue

$

%

(in thousands, except percentages)

United States

$

872,086 

95.6 

%

$

771,040 

96.0 

%

$

101,046 

13.1 

%

All other countries

39,895 

4.4 

%

31,764 

4.0 

%

8,131 

25.6 

%

Total revenue

$

911,981 

100.0 

%

$

802,804 

100.0 

%

$

109,177 

13.6 

%

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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 SleepSync™ programmer, and our SleepSync™ 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.

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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.

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

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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 SleepSync™ 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 SleepSync™ platform, and computer hardware and software. We anticipate further capital expenditures in 2026, primarily for additional manufacturing equipment and our SleepSync™ 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.

As of December 31, 2025

($ in thousands)

Total

Fiscal 2026

After Fiscal 2026

Recorded contractual obligations:

Operating leases(1)

$

40,922 

$

3,196 

$

37,726 

Unrecorded contractual obligations:

Purchase obligations(2)

90,513 

90,513 

— 

Total

$

131,435 

$

93,709 

$

37,726 

(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.

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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,

2025

2024

(in thousands)

Net cash provided by (used in):

Operating activities

$

116,976 

$

130,246 

Investing activities

21,446 

(113,122)

Financing activities

(183,449)

(52,393)

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.

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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 SleepSync™ 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 SleepSync™ 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.

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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.