This proxy statement (this “Proxy Statement”) contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are forward-looking statements, including, without limitation, statements regarding the plans and expectations under its sustainability initiatives of Inspire Medical System, Inc. (the “Company”). In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “future,” “outlook,” “guidance,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

These forward-looking statements are based on management’s current expectations and involve known and unknown risks and uncertainties that may cause actual future events to differ materially from the forward-looking statements in this Proxy Statement, including but not limited to the factors, risks and uncertainties included in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and as such factors may be updated from time to time in the Company’s other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and the Investors page of the Company’s website at www.inspiresleep.com. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this Proxy Statement. Any such forward-looking statements represent management’s estimates as of the date of this Proxy Statement. While the Company may elect to update such forward-looking statements at some point in the future, unless required by applicable law, the Company disclaims any obligation to do so, even if subsequent events cause its views to change. Thus, one should not assume that the Company’s silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s views as of any date after the date of this Proxy Statement.

The information provided in this Proxy Summary is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.

Our Board of Directors Recommendation:

This Proxy Statement and our annual report for the fiscal year ended December 31, 2023 (the “Annual Report” and, together with the Proxy Statement, the “proxy materials”) are being furnished by and on behalf of the board of directors (the “Board” or the “Board of Directors”) of Inspire Medical Systems, Inc. (the “Company,” “Inspire,” “we,” “us,” or “our”), in connection with our Annual Meeting. This Notice of Annual Meeting and Proxy Statement are first being distributed or made available, as the case may be, on or about March 19, 2024.

In connection with our solicitation of proxies for our 2025 annual meeting of stockholders, we intend to file a proxy statement and WHITE proxy card with the Securities and Exchange Commission (the “SEC”). Stockholders may obtain our proxy statement (and any amendments and supplements thereto) and other documents as and when filed with the SEC without charge from the SEC’s website at: www.sec.gov.

Inspire Medical Systems, Inc. is a medical technology company committed to enhancing patient lives through sleep innovation. Inspire’s proprietary Inspire therapy is the first and only FDA-approved neurostimulation technology that provides a safe and effective treatment for moderate to severe obstructive sleep apnea.

Since our founding in 2007, we have been steadfast in our commitment to prioritize patient outcomes, act with integrity, and lead with respect. With positive persistence at our core, we are committed to all those we serve.

 

Inspire is safe with a strong track record of positive clinical outcomes

We work to improve the economic, social, and environmental impacts that our business has on the communities in which we operate, as well as our customers, business partners, suppliers, employees, and stockholders. We understand our responsibilities as a corporate citizen and are focused on developing programs and initiatives that are sustainable and have real impact. In December 2023, we published our second annual ESG Report which describes our various sustainability programs and initiatives. A copy of the ESG Report is available in the “Investors” section of our website under “Corporate Governance.” Information on our website, including our ESG Report, is not part of this or any other report we file with, or furnish to, the SEC.

 

Our certificate of incorporation as currently in effect (“Certificate of Incorporation”) provides that the number of directors shall be established from time to time by our Board of Directors. Our Board of Directors has fixed the number of directors at nine, effective immediately following the Annual Meeting on May 2, 2024, and after the Annual Meeting we will have nine directors serving on the Board (see “Current Directors and Terms” below).

Our Certificate of Incorporation provides that the Board be divided into three classes, designated as Class I, Class II, and Class III, serving staggered three-year terms, provided that the term of each director will continue until the election and qualification of his or her successor and is subject to his or her earlier death, resignation, or removal. At each annual meeting of stockholders, the Board proposes a slate of nominees to the stockholders for election of directors in the class whose term is expiring. Between annual meetings, the Board may elect directors to fill vacancies with new directors allocated among classes and each class should consist, as nearly as may be possible, of one-third of the total number of directors. As described further below, the Board believes that the current classified structure is appropriate for the Company at this stage and time.

Effective February 1, 2024, the Board updated the Corporate Governance Guidelines to provide that in an uncontested election of directors, any nominee for director who does not receive a majority of the votes cast for his or her election shall offer to resign from the Board. The Nominating and Corporate Governance Committee shall promptly consider the resignation offer and recommend to the full Board whether to accept it.

The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following the certification of the stockholder vote by the inspector of elections, and will disclose its decision and the reasons for rejecting the offer, if applicable, in a current report on Form 8-K. Any director who tenders his or her offer to resign from the Board pursuant to the Corporate Governance Guidelines may not participate in the Nominating and Corporate Governance Committee or Board deliberations regarding whether to accept the offer of resignation.

The Board believes that this process enhances accountability to stockholders and responsiveness to stockholders’ votes, while allowing the Board appropriate discretion in considering whether a particular director’s resignation would be in the best interests of the Company and its stockholders.

As of the date of this Proxy Statement, the Class I directors with a term ending at the 2025 annual meeting of stockholders are Shelley G. Broader, Timothy P. Herbert and Shawn T McCormick; the Class II directors with a term ending at the 2026 annual meeting of stockholders are Cynthia B. Burks, Gary L. Ellis, Georgia Garinois-Melenikiotou, and Dana G. Mead, Jr.; and the Class III directors with a term ending at the Annual Meeting are Myriam J. Curet, M.D., Jerry C. Griffin, M.D., Marilyn Carlson Nelson and Casey M. Tansey. Dr. Jerry C. Griffin and Ms. Marilyn Carlson Nelson, both Class III directors, are not seeking re-election, and their Board service will end at the Annual Meeting. Additionally, Charisse Y. Sparks, M.D., was appointed as the Company’s Chief Medical Officer, effective July 27, 2023. In connection with this appointment, Dr. Sparks resigned from the Board of Directors effective upon the commencement of her employment with the Company.

On December 28, 2023, the Board of Directors appointed Dr. Myriam J. Curet as a new independent director to the Board, and to serve on the Board’s Nominating and Corporate Governance Committee. Dr. Curet is serving as a Class III director and is standing for election at this Annual Meeting. Dr. Curet was initially identified as a potential candidate for our Board by an independent search firm that assisted the Nominating and Corporate Governance Committee in identifying and evaluating potential candidates. Dr. Curet brings extensive business and executive leadership experience in the medical device industry to our Board, including significant experience in developing and commercializing scalable solutions for minimally invasive surgery.

As a result of Dr. Griffin’s and Ms. Carlson’s retirement:

The foregoing changes were effected solely to rebalance the Board’s classes and, for all other purposes, including committee service and compensation, Ms. Broader’s and Ms. Burks’s service on the Board is deemed to have continued uninterrupted.

If elected, our directors and their respective classes following the Annual Meeting will be as follows:

Ms. Broader, Dr. Curet, and Mr. Tansey have been nominated by the Board to stand for election at the Annual Meeting. If elected by the stockholders at the Annual Meeting, Ms. Broader, Dr. Curet, and Mr. Tansey will each serve for a term expiring at the annual meeting to be held in 2027 (the “2027 Annual Meeting”) and until the election and qualification of her or his successor, or until her or his earlier death, resignation or removal.

Each person nominated for election has agreed to serve if elected, and management and the Board have no reason to believe that any nominee will be unable to serve. If, however, prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve.

The following pages contain certain biographical information as of March 19, 2024 for each nominee for director and each director whose term as a director will continue after the Annual Meeting, including all positions she or he holds, her or his principal occupation and business experience for the past five years, and the names of other publicly held companies of which the director or nominee currently serves as a director or has served as a director during the past five years.

We believe that all of our directors and nominees have or display: personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of our Board and its committees; skills and personality that complement those of our other directors and that helps build a board of directors that is effective, collegial and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our stockholders. The information presented below in the matrix and included in detail provided for each nominee and continuing director also sets forth specific experience, qualifications, attributes and skills that led our Board to the conclusion that such individual should serve as a director in light of our business and structure.

Our Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate Governance Guidelines can be found in the “Corporate Governance—Governance Documents” section of the “Investors” page of our website located at www.inspiresleep.com, or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. Among the topics addressed in our Corporate Governance Guidelines are:

In November 2023, the Board updated our Corporate Governance Guidelines to provide that directors are encouraged to participate in certain continuing education programs at the expense of the Company, and to require that each director own the Company’s common stock in accordance with any stock ownership policies and guidelines as may be in effect from time to time. Further, effective February 1, 2024, the Board updated the provisions of our Corporate Governance Guidelines addressing the election process for directors. For more information, please see the “Governance Structure” section of this Proxy Statement.

The Board regularly reviews the corporate governance policies and practices of the Company to determine whether they are appropriate and will advance the Board’s and management’s goal of maximizing long-term stockholder value. Our current governance structure includes a classified board, plurality voting for directors, and requires a supermajority vote to make certain changes to our governance documents. Following our 2023 annual meeting, we conducted a benchmarking assessment of corporate governance practices across our industry and at our peer companies, engaged in targeted stockholder outreach to discuss our governance practices, and management updated the Board on the stockholder input received during these discussions. Thereafter, in connection with its regular review of our corporate governance policies and practices, the Board considered the stockholder input received and made certain changes to our Corporate Governance Guidelines, which are discussed below. Additionally, in response to this stockholder input and to provide additional transparency with respect to its corporate governance policies and practices, the Company is providing the following information regarding the Board’s rationale for continuing to maintain certain governance practices:

In accordance with our Certificate of Incorporation, and as permitted under applicable state law, our Board of Directors is divided into three classes. Our classified board structure has been in place since our initial public offering (our “IPO”) in 2018.

The Board regularly evaluates whether to maintain a classified Board structure, and has determined that a classified board structure continues to be in the best interests of the Company and our stockholders primarily for the reasons set forth below:

The Company’s current plurality voting standard yields a definitive result in a simple, efficient and transparent manner, which has historically been effective in electing strong, independent directors to our Board. Further, we believe that under the current plurality voting standard, stockholders have a meaningful opportunity to express disapproval with corporate policies, strategy, or director candidates through the use of withhold votes.

As noted above, the Board regularly reviews the corporate governance policies and practices of the Company to determine whether they are appropriate and will advance the Board’s and management’s goal of maximizing long-term stockholder value. In this regard and after considering input received from our targeted stockholder outreach, effective February 1, 2024, the Board updated our Corporate Governance Guidelines to provide that in an uncontested election of directors, any nominee for director who does not receive a majority of the votes cast for his or her election shall offer to resign from the Board. The Nominating and Corporate Governance Committee shall promptly consider the resignation offer and recommend to the full Board whether to accept it. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following the certification of the stockholder vote by the inspector of elections, and will disclose its decision and the reasons for rejecting the offer, if applicable, in a current report on Form 8-K. Any director who tenders his or her offer to resign from the Board pursuant to the Corporate Governance Guidelines may not participate in the Nominating and Corporate Governance Committee or Board deliberations regarding whether to accept the offer of resignation.

The Board believes that this process enhances accountability to stockholders and responsiveness to stockholders’ votes, while allowing the Board appropriate discretion in considering whether a particular director’s resignation would be in the best interests of the Company and its stockholders.

Our Certificate of Incorporation and bylaws, as currently in effect (the “Bylaws”), provide that two-thirds of the voting power of the Company are required to enact certain changes to the Company’s governing documents, including, for example, adopting, amending, altering or repealing provisions of the Bylaws. At the time of our IPO in 2018, the Board believed that this supermajority voting standard was an important component of the Company's governance structure to safeguard the long-term interests of the Company and its stockholders.

The Board continues to believe that the Company’s supermajority voting standards are in the best interests of the Company and our stockholders primarily for the following reasons set forth below:

Our Corporate Governance Guidelines provide our Board of Directors with flexibility to combine or separate the positions of Chair of the Board and Chief Executive Officer, or CEO, in accordance with its determination that utilizing one or the other structure would be in the best interests of the Company and its stockholders. If the Chair of the Board is a member of management or does not otherwise qualify as independent, our Corporate Governance Guidelines provide for the appointment of a presiding non-management director (the “Lead Director”), as recommended by the Nominating and Corporate Governance Committee. The Lead Director’s responsibilities include, but are not limited to: assisting the Chair of the Board in establishing the agendas for Board meetings and the schedule of agenda subjects to be discussed during the year; having the authority to call meetings of the independent directors; presiding at meetings of the Board at which the Chair is not present, including executive sessions of the independent directors; serving as a liaison between the Chair and the independent directors; previewing the information to be provided to the Board; together with the Chair of the Organization and Compensation Committee, communicating to the CEO the results of his or her annual performance review and compensation; together with the Chair of the Nominating and Corporate Governance Committee, leading the Board’s annual self-evaluation; and to have such other duties as are otherwise determined by the Board from time to time.

The positions of our Chair of the Board and our CEO and President are currently served by two separate persons. Ms. Nelson, an independent director on our Board, serves as Chair of the Board, and Mr. Herbert serves as our CEO and President. The Board appointed Mr. Herbert, our CEO and President, to serve as Chair of the Board effective with Ms. Carlson’s departure from the Board at the Annual Meeting and resulting from her determination not to stand for reelection. The Board believes that Mr. Herbert's decades of expertise in the medical device industry as well as his deep understanding of the business that he founded make him uniquely qualified to effectively manage the business, execute on our strategic priorities and lead the Board. To maintain strong independent oversight, the Board has appointed Gary L. Ellis to the role of Lead Director effective immediately following the Annual Meeting. Mr. Ellis was appointed to the Board in 2019 following an extensive career as Chief Financial Officer of Medtronic and serves as the Chair of the Nominating and Corporate Governance Committee.

The Board believes this leadership structure effectively allocates authority, responsibility, and oversight between management and the independent members of our Board, giving primary responsibility for the operational leadership and strategic direction of the Company to our Chair and CEO, while enabling the Lead Director to facilitate the Board's independent oversight of management. In addition, the Board believes this leadership structure appropriately aligns with the Board’s overall oversight of risk, as described under “Board Role in Risk Oversight” below.

We recognize that different leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies at all times. Accordingly, the Board will continue to periodically review our leadership structure and make such changes in the future as it deems appropriate and in the best interests of the Company and its stockholders.

Under our Corporate Governance Guidelines and the NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with us. In addition, the director must meet the bright-line tests for independence set forth by the NYSE rules.

Our Board has undertaken a review of its composition, the composition of its committees, and the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that none of Ms. Broader, Ms. Burks, Dr. Curet, Mr. Ellis, Ms. Garinois-Melenikiotou, Dr. Griffin, Mr. McCormick, Mr. Mead, Ms. Nelson, or Mr. Tansey, representing 10 of our 11 current directors and 8 of our 9 directors whose term will continue after the Annual Meeting, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors qualifies as “independent” as that term is defined under the rules of the NYSE. Our Board of Directors previously determined that Dr. Sparks did not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and qualified as “independent” while she was a director. Mr. Herbert, our President and CEO, is the only director who is not independent. In making these determinations, our Board of Directors considered the relationships that each non-employee director has with us and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the director’s beneficial ownership of our common stock, the relationships of our non-employee directors with certain of our significant stockholders and the organizations with which our non-employee directors have current relationships that may be pertinent to their independence.

Our Board of Directors has three standing committees: an Audit Committee, an Organization and Compensation Committee, and a Nominating and Corporate Governance Committee, each of which has the composition and the responsibilities described below. In addition, from time to time, special committees may be established under the direction of our Board when necessary to address specific issues. Each of the Audit Committee, the Organization and Compensation Committee, and the Nominating and Corporate Governance Committee operates under a written charter that is available on our website. The table below reflects our committee membership as of March 19, 2024.

Audit Committee

Our Audit Committee oversees our corporate accounting and financial reporting process and assists our Board of Directors in its oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our risk management program, (iv) the performance of our independent auditor, and (v) the design and implementation of our internal audit function and internal controls. Our Audit Committee is responsible for, among other things:

The Audit Committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time. The Audit Committee has the authority to engage independent legal, accounting, and other advisors as it deems necessary or appropriate to assist in carrying out its responsibilities. We must provide appropriate funding for payment of reasonable compensation to any advisor retained by the Audit Committee.

Our Audit Committee currently consists (and for all of fiscal 2023 consisted) of Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead, with Mr. McCormick serving as chair. All members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the NYSE. Our Board of Directors has affirmatively determined that each of Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead qualifies as “independent” under NYSE’s additional standards applicable to audit committee members and Rule 10A-3 of the Exchange Act of 1934, as amended (the “Exchange Act”). In addition, our Board of Directors has determined that Ms. Garinois-Melenikiotou, Mr. McCormick, and Mr. Mead each qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. The determination by our Board of Directors for Mr. McCormick was made based on experience and education which demonstrate his attributes as an audit committee financial expert, including the fact that he has been the chief financial officer of several medical technology companies and is a Certified Public Accountant (inactive), holding a degree in accounting and an M.B.A. Both Ms. Garinois-Melenikiotou and Mr. Mead also have education and experience supporting their determination by the Board of Directors as audit committee financial experts, including that both have M.B.A. degrees and financial oversight experience, with Ms. Garinois-Melenikiotou gaining this experience as a president at Johnson & Johnson and Mr. Mead gaining this experience as a CEO of several medical technology companies.

Our Organization and Compensation Committee oversees our human capital strategies and programs, and our compensation policies, plans, and benefits programs. The committee is responsible for, among other things:

The Organization and Compensation Committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time.

Our Organization and Compensation Committee currently consists (and for all of fiscal 2023 consisted) of Ms. Broader, Ms. Burks, and Mr. Tansey, with Ms. Broader serving as chair. Our Board of Directors has determined that each of Ms. Broader, Ms. Burks, and Mr. Tansey qualifies as “independent” under NYSE’s additional standards applicable to compensation committee members and as a “non-employee director” as defined in Rule 16b-3 of the Exchange Act.

The Organization and Compensation Committee has the authority to retain or obtain the advice of compensation consultants, legal counsel, and other advisors to assist in carrying out its responsibilities. Before selecting any such consultant, counsel or advisor, the Organization and Compensation Committee reviews and considers the independence of such consultant, counsel, or advisor in accordance with applicable NYSE rules. We must provide appropriate funding for payment of reasonable compensation to any advisor retained by the Organization and Compensation Committee.

The Organization and Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. In accordance with this authority, the Organization and Compensation Committee has engaged the services of Aon, which is part of the Rewards Solutions practice at Aon plc, as its independent outside compensation consultant.

All executive compensation services provided by Aon during fiscal 2023 were conducted under the direction or authority of the Organization and Compensation Committee, and all work performed by Aon was pre-approved by the Organization and Compensation Committee. Aon’s services during fiscal 2023 included, among other things, reviewing the Company’s executive compensation policy, evaluating the Company’s peer group used to set executive compensation, providing benchmark data as well as broad market data regarding compensation for executives serving in similar capacities, and providing information on current trends and developments in executive and director compensation. Neither Aon nor any of its affiliates maintains any other direct or indirect business relationships with us or any of our subsidiaries. The Organization and Compensation Committee evaluated whether any work provided by Aon raised any conflict of interest for services performed during fiscal 2023 and determined that it did not.

Additionally, during fiscal 2023, Aon did not provide any services to us unrelated to executive and director compensation.

During the 2023 fiscal year, the directors who served on our Organization and Compensation Committee were Ms. Broader, Ms. Burks, and Mr. Tansey, none of whom was, during the fiscal year, an officer or employee of the Company and none of whom was formerly an officer of the Company. During fiscal 2023, none of our executive officers served as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that had one or more executive officers serving on our Board or Organization and Compensation Committee. During fiscal 2023, no other relationships required to be disclosed by the rules of the SEC existed aside from those identified herein.

Our Nominating and Corporate Governance Committee oversees and assists our Board in reviewing and recommending nominees for election as directors. Our Nominating and Corporate Governance Committee is responsible for, among other things:

The Nominating and Corporate Governance Committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time. The Nominating and Corporate Governance Committee has the authority to retain any search firm to be used to identify director nominees and independent legal and other advisors as it deems necessary or appropriate to carry out its responsibilities and we will pay the compensation of any such firm or advisor engaged. During fiscal 2023, the committee retained Russell Reynolds Associates Inc., a global executive search firm, to assist in the identification and assessment of potential director candidates.

For fiscal 2023, our Nominating and Corporate Governance Committee consisted of Mr. Ellis, Dr. Griffin, Ms. Nelson, Dr. Sparks (until Dr. Sparks resigned from the Board effective July 27, 2023), and Dr. Curet (effective December 21, 2023, upon her appointment to the Board), with Mr. Ellis serving as chair. After the Annual Meeting, the Nominating and Corporate Governance Committee will consist of Dr. Curet, Mr. Ellis, and Mr. Mead, with Mr. Ellis serving as chair. Our Board has determined that each of Dr. Curet, Dr. Griffin, Mr. Ellis and Mr. Mead qualifies as “independent” under applicable NYSE rules for purposes of serving on the Nominating and Corporate Governance Committee.

During fiscal 2023, our Board of Directors met 6 times, the Audit Committee met 8 times, the Organization and Compensation Committee met 5 times, and the Nominating and Corporate Governance Committee met 7 times. In fiscal 2023, each of our incumbent directors attended at least 90% of the meetings of the Board and committees on which he or she served as a member.

Executive sessions, which are meetings of the non-management members of the Board, are regularly scheduled throughout the year. In addition, at least once a year, the independent directors meet in a private session that excludes management and any non-independent directors. The Chair of the Board currently presides at executive sessions. Following the Annual Meeting, the Lead Director will preside at executive sessions. In the absence of the Chair or Lead Director, as applicable, the non-management and independent directors in attendance, as applicable, determine which member will preside at such session.

All newly appointed members of our Board participate in an orientation program designed to familiarize new directors with our business and strategic plans, key policies and practices, principal officers and management structure, auditing and compliance processes, and our Code of Business Conduct and Ethics. The Board also receives periodic briefings and education from management on core concepts and trends impacting our businesses and industry. In November 2023, the Board updated our Corporate Governance Guidelines to provide that directors are encouraged to participate in certain continuing education programs at the expense of the Company.

We do not have a formal policy regarding the attendance of our Board members at our annual meetings of stockholders, but we expect all directors to make every effort to attend any meeting of stockholders. All of our directors attended our annual meeting of stockholders held in fiscal 2023.

The Nominating and Corporate Governance Committee is responsible for recommending candidates to serve on the Board and its committees. In considering whether to recommend a candidate to serve on the Board or its committees or for inclusion in the Board’s slate of recommended director nominees for election at the annual meeting of stockholders, the Nominating and Corporate Governance Committee considers the criteria set forth in our Corporate Governance Guidelines. Specifically, the Nominating and Corporate Governance Committee will consider candidates who have a high level of personal and professional integrity, strong ethics and values, and the ability to make mature business judgments. The Corporate Governance Guidelines provide that in addition to the foregoing director qualification standards, the Nominating and Corporate Governance Committee may consider the following criteria as well as any other factor that they deem to be relevant: the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company; the candidate’s experience as a board member of another publicly held company; the candidate’s professional and academic experience relevant to the Company’s industry; the strength of the candidate’s leadership skills; the candidate’s experience in finance and accounting and/or executive compensation practices; whether the candidate has the time required for preparation, participation, and attendance at Board meetings and committee meetings, if applicable; and the candidate’s geographic background, gender, age, and ethnicity.

We consider diversity, such as, gender, race, and ethnicity, in identifying director nominees. Currently, five of our Board members self-identify as women, including one African American woman and one Hispanic woman. Moreover, the Nominating and Corporate Governance Committee seeks to identify qualified diverse candidates for consideration on our Board, including diversity of gender, race, and ethnicity. In furtherance of this focus, the Nominating and Corporate Governance Committee will seek to include women, and ethnically and racially diverse candidates in the initial list of candidates from which it will select prospective director candidates in each future director search, and will require that any search firm it may engage to assist with a director search do the same.

The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee may also consider potential conflicts of interest with the candidate’s other personal and professional pursuits.

In identifying prospective director candidates, the Nominating and Corporate Governance Committee may seek referrals from other members of the Board, management, stockholders, and other sources, including third party recommendations. The committee also may, but need not, retain a third-party search firm in order to assist it in identifying candidates to serve as directors. The Nominating and Corporate Governance Committee uses the same criteria for evaluating candidates regardless of the source of the referral or recommendation. When considering director candidates, the committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In

connection with its annual recommendation of a slate of nominees, the Nominating and Corporate Governance Committee also may assess the contributions of directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board.

The Nominating and Corporate Governance Committee has recommended, and the Board selected, Shelley G. Broader, Myriam J. Curet, M.D., and Casey M. Tansey as the Board's nominees for election as Class III directors at the Annual Meeting. Each of the director nominees to be elected at the Annual Meeting was evaluated in accordance with our standard review process for director candidates in connection with their initial appointment and their nomination for election or re-election, as applicable, at the Annual Meeting.

When considering whether the directors and nominees have the experience, qualifications, attributes, and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focused primarily on the information discussed in each of the board member’s biographical information set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. This process resulted in the Board’s nomination of the incumbent directors named in this Proxy Statement and proposed for election by you at the Annual Meeting.

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders, and such candidates will be considered and evaluated under the same criteria described above. Any recommendation submitted to the Company should be in writing and should include any supporting material the stockholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and a written consent of the candidate to serve as one of our directors if elected. Stockholders wishing to propose a candidate for consideration may do so by submitting the above information to the attention of the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. All recommendations for director nominations received by the Secretary will be presented to the Nominating and Corporate Governance Committee for its consideration. Stockholders intending to nominate a director candidate for consideration at a stockholder meeting also must satisfy the notification, timeliness, consent, and information requirements set forth in our Bylaws. These timing requirements are also described in the “Stockholder Proposals and Director Nominations” section of this Proxy Statement.

The Board has overall responsibility for risk oversight, including, as part of regular Board and committee meetings, general oversight of executives’ management of risks relevant to the Company. A fundamental part of risk oversight is not only understanding the material risks the Company faces and the steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The involvement of the Board of Directors in reviewing our business strategy is an integral aspect of the Board’s assessment of management’s tolerance for risk and its determination of what constitutes an appropriate level of risk for the Company. While the full Board has overall responsibility for risk oversight, it is supported in this function by its Audit Committee, Organization and Compensation Committee, and Nominating and Corporate Governance Committee. Each of the committees regularly reports to the Board.

The Audit Committee assists the Board in fulfilling its risk oversight responsibilities by periodically reviewing our accounting, reporting, and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls, our compliance with legal and regulatory requirements, and our enterprise risk management program. The Audit Committee also oversees our information security and technology risks, including our information security, cybersecurity and related risk management programs. Through its regular meetings with management, including the finance, legal, internal audit, tax, compliance, and information technology functions, the Audit Committee reviews and discusses significant areas of our business and summarizes for the Board areas of risk and the appropriate mitigating factors, including the Company's major financial risk exposures. The Organization and Compensation Committee assists the Board by overseeing and evaluating risks related to the Company’s compensation structure and compensation programs, including the formulation, administration, and regulatory compliance with respect to compensation matters, and coordinating, along with the Board’s Chair, succession

planning discussions. The Nominating and Corporate Governance Committee assists the Board by overseeing and evaluating programs and risks associated with Board organization, membership and structure, and corporate governance. All three committees of the Board jointly oversee ESG-related risks. In addition, our Board receives periodic, detailed operating performance reviews from management.

Our Board believes that ownership of significant amounts of our stock by our executive officers and directors will help align their interests with those of our stockholders. To that end, our Board has adopted stock ownership guidelines for our directors and executive officers as follows:

All of our non-employee directors and each executive officer covered by the policy are required to meet the applicable guidelines within five (5) years after the later of (i) the date such individual is hired, appointed or promoted to a position that is covered by the guidelines, or (ii) the effective date of the guidelines, or July 27, 2023. Shares that count toward meeting the ownership guidelines consist of shares owned outright; shares held through any Company-sponsored plan, such as, a qualified retirement plan, employee stock purchase plan, or a supplemental executive retirement plan; unvested time-based restricted stock units (net of an estimated tax); and shares owned by the individual’s immediate family members residing in the same household (or through trusts for their benefit). As of December 31, 2023, all of our non-employee directors and all of our executive officers subject to the policy have attained the minimum level of ownership set forth in the guidelines, with the exception of Director Burks (who joined our Board in July 2022), and Messrs. Ban, Ebeling, and Weatherby (who joined our Company in June 2023).

Our Corporate Governance Guidelines, charters of the Audit Committee, Organization and Compensation Committee, and Nominating and Corporate Governance Committee and other corporate governance information are available under the Corporate Governance section of the Investors page of our website located at , or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416.

We have adopted a Code of Conduct that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of our Code of Conduct is available under the Corporate Governance section of the Investors page of our website located at www.inspiresleep.com, or by writing to our Secretary at our offices at 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. We intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Conduct on our website rather than by filing a Current Report on Form 8-K with the SEC.

Our Board has adopted an Insider Trading Compliance Policy, which applies to all of our directors, officers, and employees. The policy prohibits our directors, officers, and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, short sales, and transactions in publicly traded options, such as puts, calls, and other derivatives involving our equity securities.

Any stockholder or any other interested party who desires to communicate with our Board, our Chair, our Lead Director, our non-management or independent directors or any specified individual director, may do so by directing such correspondence to the attention of the Secretary, Inspire Medical Systems, Inc., 5500 Wayzata Blvd., Suite 1600, Golden Valley, MN 55416. The Secretary will forward the communication to the appropriate director or directors as appropriate.

At the request of the Board, and following the 2023 annual meeting, we engaged in a targeted stockholder outreach to hear perspectives from our stockholders on a range of issues including our governance structure. Our engagement team included our (i) Chief Financial Officer, (ii) SVP, General Counsel, Chief Compliance and Corporate Secretary and (iii) Vice President, Investor Relations. We held meetings with five of our top ten stockholders.

Provided below are highlights of the feedback we received from stockholders addressing our classified board structure, plurality voting for direction elections and supermajority voting requirements for certain changes to our governance documents. Across each of these governance topics, stockholders requested additional disclosure addressing the Board’s rationale and considerations for regular review of our governance structure.

The Board reviewed the feedback from stockholders at its meeting in July 2023 and discussed the perspectives shared as well as trends in market practices. After extensive consideration, the Board determined to provide additional disclosure on the rationale for the current governance structure (which disclosure is provided in the “Corporate Governance” section of this Proxy Statement) and will be regularly revisiting and evaluating governance practices and potential modifications to ensure that the structure is appropriate for the Company’s circumstances and stage of growth and in the best interests of the Company and its stockholders.

We maintain a compensation policy that provides cash and equity compensation to our non-employee directors for their service on the Board and its committees as discussed below. On a periodic basis, the Organization and Compensation Committee reviews the policy to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform our Board’s duties and to compensate our directors fairly for their services, and to determine whether any recommendations for adjustment should be made to the Board. The review includes the consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Organization and Compensation Committee considers: (1) the time and effort involved in preparing for Board and committee meetings and the additional duties assumed by committee chairs and our chair; (2) the risks associated with fulfilling fiduciary duties; and (3) the compensation paid to directors at the same peer group of companies used to assess the competitiveness of our executive compensation programs. All cash and equity awards granted under the non-employee director compensation policy will be granted under, and subject to the limits of, the Inspire Medical Systems, Inc. 2018 Incentive Award Plan (“2018 Plan”).

On April 27, 2023, the Board approved changes to the 2023 compensation for our non-employee directors upon the recommendation of the Organization and Compensation Committee and our independent compensation consultant in order to maintain the competitiveness of our director compensation program with our peers. As a result, the general annual Board retainer was increased to $50,000 and the equity retainer was changed from a combination of stock options and restricted stock units (“RSUs”) to be comprised of solely RSUs.

Cash Compensation. Under the policy last amended April 27, 2023, each of our non-employee directors is eligible to receive an annual retainer of $50,000. Our non-employee directors are also eligible to receive additional annual retainers as follows:

The cash retainers are paid quarterly following the completion of each calendar quarter. The Board may, in its discretion, permit a non-employee director to elect to receive any portion of the annual cash retainer in the form of fully vested and unrestricted shares of common stock in lieu of cash.

Equity Compensation. In addition to the cash compensation described above, each of our non-employee directors is eligible to receive an award of stock options as compensation for his or her service on the Board. Upon a director’s initial election or appointment to the Board, such director will receive an award of RSUs having a grant date fair value of $270,000, which award will vest in three equal installments following the grant date. On an annual basis thereafter, each non-employee director is eligible to receive an award of RSUs having a grant date fair value of $180,000, which award will vest on the first anniversary of the grant date. The initial and annual awards will be subject to the director’s continuing service through the applicable vesting dates. All initial and annual awards will vest in full immediately prior to the occurrence of a Change in Control (as defined in the 2018 Plan).

The following table sets forth information concerning the compensation of our non-employee directors for the fiscal year ended December 31, 2023:

The Audit Committee appoints our independent registered public accounting firm. In this regard, the Audit Committee evaluates the qualifications, performance, and independence of our independent registered public accounting firm and determines whether to re-engage our current firm. As part of its evaluation, the Audit Committee considers, among other factors, the quality and efficiency of the services provided by the firm, including the performance, technical expertise, industry knowledge, and experience of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the firm; the firm’s global capabilities relative to our business; and the firm’s knowledge of our operations. Ernst & Young LLP has served as our independent registered public accounting firm since 2015. Neither the accounting firm nor any of its members has any direct or indirect financial interest in or any connection with us in any capacity other than as our auditors and providing audit and permissible non-audit related services. Upon consideration of these and other factors, the Audit Committee has appointed Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2024.

Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and it is a good corporate governance practice. If our stockholders do not ratify the selection, it will be considered as notice to the Board and the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

Representatives of Ernst & Young LLP are expected to attend the Annual Meeting and to have an opportunity to make a statement and be available to respond to appropriate questions from stockholders.

The table below sets forth the aggregate fees billed to Inspire for services related to the fiscal years ended December 31, 2023 and 2022, respectively, by Ernst & Young LLP, our independent registered public accounting firm.

The formal written charter for our Audit Committee requires that the Audit Committee pre-approve all audit and non-audit services provided to us by our independent registered public accounting firm, unless the engagement is entered into pursuant to appropriate preapproval policies established by the Audit Committee or if such service falls within available exceptions under SEC rules.

The Audit Committee has adopted a pre-approval policy that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by our independent registered public accounting firm may be pre-approved. This pre-approval policy generally provides that the Audit Committee will not engage the independent registered public accounting firm to render any audit, audit-related, tax or permissible non-audit service unless the service is either (i) explicitly approved by the Audit Committee or (ii) entered into pursuant to the pre-approval policies and procedures described in the pre-approval policy. Unless a type of service to be provided by our independent registered public accounting firm has received this latter general pre-approval under the pre-approval policy, it requires specific pre-approval by the Audit Committee.

On an annual basis, the Audit Committee reviews and generally pre-approves the services (and related fee levels or budgeted amounts) that may be provided by the Company’s independent registered public accounting firm without first obtaining specific pre-approval from the Audit Committee. The Audit Committee may revise the list of general pre-approved services from time to time, based on subsequent determinations. Any member of the Audit Committee to whom the committee delegates authority to make pre-approval decisions must report any such pre-approval decisions to the Audit Committee at its next scheduled meeting. If circumstances arise where it becomes necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories or above the pre-approved amounts, the Audit Committee requires pre-approval for such additional services or such additional amounts.

The services provided to us by Ernst & Young LLP in fiscal 2022 and fiscal 2023 were provided in accordance with our pre-approval policies and procedures, as applicable.

The Audit Committee operates pursuant to a charter which is reviewed annually by the Audit Committee. Additionally, a brief description of the primary responsibilities of the Audit Committee is included in this Proxy Statement under the discussion of “Corporate Governance— Audit Committee.” Under the Audit Committee charter, management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, the application of accounting and financial reporting principles, and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.

In the performance of its oversight function, the Audit Committee reviewed and discussed with management and Ernst & Young LLP, as the Company’s independent registered public accounting firm, the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2023. The Audit Committee also discussed with the Company’s independent registered public accounting firm the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. In addition, the Audit Committee received and reviewed the written disclosures and the letters from the Company’s independent registered public accounting firm required by applicable requirements of the PCAOB regarding such independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with the Company’s independent registered public accounting firm their independence from the Company.

Based upon the review and discussions described in the preceding paragraph, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be included in its Annual Report on

Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC.

Submitted by the Audit Committee of the Company’s Board of Directors:

Shawn T McCormick (Chair)

Georgia Garinois-Melenikiotou

Dana G. Mead, Jr.

The table below identifies and sets forth certain biographical and other information regarding our executive officers as of March 19, 2024. There are no family relationships among any of our executive officers or directors.

See page 12 of this Proxy Statement for Timothy P. Herbert’s biography.

As required by Section 14A(a)(1) of the Exchange Act, the below resolution enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this Proxy Statement. This proposal (the “Say-on-Pay Vote”), and commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation. The Say-on-Pay Vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. At our 2020 annual meeting of stockholders, our stockholders recommended, on an advisory basis, that the stockholder vote on the compensation of our NEOs occur every year. In light of the foregoing recommendation, the Board determined to hold a “say-on-pay” advisory vote every year. Accordingly, our next advisory say-on-pay vote (following the non-binding advisory vote at this Annual Meeting) is expected to occur at our 2025 annual meeting of stockholders. At our 2023 annual meeting of stockholders, approximately 89% of the votes cast on the say-on-pay proposal were voted “FOR” the proposal.

We encourage our stockholders to review the “Executive Compensation” section of this Proxy Statement for more information.

As an advisory approval, this proposal is not binding upon us or our Board of Directors. However, the Organization and Compensation Committee, which is responsible for the design and administration of our executive compensation program, values the opinions of our stockholders expressed through your vote on this proposal. The Board and Organization and Compensation Committee will consider the outcome of this vote in making future compensation decisions for our NEOs. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the stockholders of Inspire Medical Systems, Inc. approve, on an advisory basis, the fiscal 2023 compensation of Inspire Medical Systems, Inc.’s named executive officers as described in the “Executive Compensation” section and disclosed in the Summary Compensation Table and related compensation tables and narrative disclosure set forth in Inspire Medical Systems, Inc.’s Proxy Statement for the 2024 Annual Meeting of Stockholders.”

In this Compensation Discussion and Analysis (“CD&A”), we provide an overview of the compensation awarded to or earned by our named executive officers (“NEOs”) identified below during fiscal 2023. The following discussion and analysis details the Company’s philosophy and policies regarding executive compensation, the process that is used to set executive compensation within the Company, the elements of the executive compensation program, and other elements and aspects of our executive compensation program. In fiscal 2023, our “named executive officers” were as follows:

We had a strong year in fiscal 2023, with outstanding financial results and excellent progress in our product development programs. Key highlights include the following:

As shown in the graphic below, our Total Shareholder Return (“TSR”) for 2023 was -19.2%, and our cumulative TSR since our May 2018 IPO through the end of fiscal 2023 was 714.4%, outperforming relevant indices overall since our IPO.

 

Compensation Philosophy Based on Pay for Performance. Our compensation philosophy is performance-based and focuses on aligning the financial interests of our executive officers with those of our stockholders. Generally, this is accomplished by placing a substantial portion of our executive officers’ total compensation “at risk.” We consider compensation to be “at-risk” if it is subject to achievement of meaningful pre-set, objective financial or operating goals, such as in our cash-based management incentive program, or if it depends on stock price appreciation or value, as in our long-term incentive program.

Consistent with the market practice of similar, newly public companies in our industry, and in order to focus executives on growth and increasing stockholder value at our early stage of development, our long-term incentive (“LTI”) program historically consisted solely of stock options. In our view, stock options are simple and inherently performance-based, requiring stock price appreciation before there is any value earned.

Performance Stock Units. As the Company has continued to evolve and mature following its IPO in 2018, the Organization and Compensation Committee has correspondingly sought to evolve the executive compensation program as appropriate for a company of our stage of development and size. In particular, the Organization and Compensation Committee is in the midst of a multi-year plan to transition the amounts and forms of compensation to those aligned with public companies, including those in our peer group, by having a more typical, regular program of equity grants.

In this regard, beginning in 2022, the Organization and Compensation Committee introduced performance stock units (“PSUs”) as a component of our LTI program. The performance-based metrics associated with these awards, in conjunction with the proportion of total compensation that was variable and at-risk, further enhanced the link between pay and performance for our executive officers, as well as strengthened the alignment of their interests with those of our stockholders.

As shown in the graphic below, in fiscal 2023, approximately 91% of our CEO’s target total direct compensation was variable and at-risk compensation, and on average, approximately 81% of the target total direct compensation of our other NEOs was variable and at-risk.

 

The performance-based metrics and the proportion of total compensation that was variable and at-risk further enhanced the link between pay and performance for the CEO and other NEOs and strengthened the alignment of the interests of our NEOs with those of our stockholders. See the following pages for more details on the elements of our compensation program.

At the outset of 2023, we established goals for the revenue, operating income or loss, global insurance reimbursement approvals, and regulatory and product development objectives metrics under our annual cash Management Incentive Program (“MIP”). These objectives were rigorous, aggressive, and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks. The revenue target represented a 52% increase over the prior year’s actual results, reflecting our ambitious business and operational plans for the year. In order to earn any payout with respect to this most heavily weighted goal, a minimum of 90% of target performance had to be achieved. The Organization and Compensation Committee also set similarly challenging targets and threshold levels for the other performance metrics and evaluated performance achievement relative to the goals.

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. We believe that for us to be successful, we must hire and retain highly-skilled and experienced people who can continue to develop and execute our strategy, innovate our products and services and lead our team.

Our compensation philosophy is performance-based and focuses on aligning the financial interests of our executive officers with those of our stockholders. Generally, this is accomplished by placing a substantial portion of our executive officers’ total compensation “at risk,” while providing overall compensation opportunities that are comparable to market levels. With this in mind, our executive compensation programs are designed to:

We are committed to having strong governance standards with respect to our compensation programs, procedures, and practices. Our key compensation practices include the following:

The Organization and Compensation Committee establishes our compensation philosophy and objectives, determines the structure, components, and other elements of executive compensation, and reviews and approves the compensation of the NEOs or recommends it for approval by the Board. The Organization and Compensation Committee structures the executive compensation program to accomplish its articulated objectives in light of the compensation philosophy described above.

The Organization and Compensation Committee obtains input from executive officers regarding the annual operating plan, including the range of financial and operating results and the potential opportunities and risks that could impact those results. Based on this information, the Organization and Compensation Committee establishes the performance-based metrics and targets used in connection with our performance-based annual cash incentives and

our performance-based equity grants (as discussed below). For each metric, the Organization and Compensation Committee sets appropriate threshold and maximum levels of performance designed to motivate achievement without incentivizing excessive risk-taking. The Organization and Compensation Committee reviews the elements of our executive compensation program to verify the alignment of the program with our business strategy and with the items that we believe drive the creation of stockholder value, and to determine whether any changes would be appropriate.

After the end of the annual or long-term performance period, the Organization and Compensation Committee evaluates achievement relative to the performance targets, and determines corresponding payouts earned. With the input of the CEO, the Organization and Compensation Committee also establishes the compensation for all the other executive officers.

The Organization and Compensation Committee works with our CEO to set the target total direct compensation of each of our NEOs other than with respect to his own compensation. As part of this process, our CEO evaluates each other NEO, determines his recommendations about the target compensation of each such NEO, and delivers his evaluations and compensation recommendations to the Organization and Compensation Committee. The Organization and Compensation Committee gives significant weight to the recommendations of the CEO in light of his greater familiarity with the day-to-day performance of his direct reports and the importance of incentive compensation in driving the performance of the business. Nevertheless, the Organization and Compensation Committee makes the ultimate determination regarding the compensation of the NEOs.

When the Organization and Compensation Committee discusses and formulates the compensation recommendation for our CEO, he does not play any role with respect to any matter affecting his own compensation and is not present.

To design and develop the compensation program, the Organization and Compensation Committee coordinates with the Vice President, Human Resources, and collaborates with the finance and legal teams as appropriate. This group supports the Organization and Compensation Committee through the preparation of analyses of financial data, peer comparisons, and other materials, and helps to implement the committee’s decisions.

The Organization and Compensation Committee recognizes that there is value in procuring independent, objective expertise and counsel in connection with fulfilling its duties, and has the authority to retain an independent compensation consultant to assist it in carrying out its responsibilities and duties.

Since 2017, the Organization and Compensation Committee has engaged Aon’s Human Capital Solutions practice, a division of Aon plc, as its independent compensation consultant for compensation decisions. Aon reported directly to the Organization and Compensation Committee, and the Organization and Compensation Committee has the sole authority to retain, terminate, and obtain the advice of Aon at the Company’s expense.

The Organization and Compensation Committee worked with Aon to develop a peer group, provide a competitive market analysis of the base salary, annual cash incentive awards, and long-term incentive compensation of our NEOs compared against the compensation peer group, report on share utilization, and review other market practices and trends.

Although the Organization and Compensation Committee took into consideration the review and recommendations of Aon when making decisions about our executive compensation program, ultimately, the Organization and Compensation Committee made its own independent decisions in determining our executives’ compensation.

The Organization and Compensation Committee assessed the independence of Aon pursuant to SEC and NYSE rules. In doing so, the Organization and Compensation Committee considered each of the factors set forth by the SEC and NYSE with respect to a compensation consultant’s independence. The Organization and Compensation Committee also considered the nature and amount of work performed for the Organization and Compensation

Committee and the fees paid for those services in relation to the firm’s total revenues. On the basis of its consideration of the foregoing and other relevant factors, the Organization and Compensation Committee concluded that Aon was independent and that there were no conflicts of interest.

The Organization and Compensation Committee believes that obtaining relevant market and benchmark data is of paramount importance in its executive compensation determinations. Such information provides helpful context and a solid reference point when making compensation decisions, though unique aspects of the Company and our business may ultimately drive compensation decisions that differ from our peers. The Organization and Compensation Committee takes into consideration the structure and components of, and the amounts paid under, the executive compensation programs of other comparable peer companies. This information is derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program.

The Organization and Compensation Committee, with the assistance of Aon, developed a peer group using criteria designed to identify companies that reflect our size (measured by revenue, market capitalization, number of employees, and other size measures) and business profile (generally medical device companies). Based on these criteria, the Organization and Compensation Committee approved the following peer group for 2023:

The following table summarizes our scale relative to our peer group. Financial data reflects fiscal year-end data available as of July 2022.

Consistent with best practices for corporate governance, the Organization and Compensation Committee reviews our peer group at least annually. In addition to the selected peer group, as discussed above, the Organization and Compensation Committee references general and specific industry surveys from other sources.

With the assistance of Aon, the Organization and Compensation Committee uses data from the peer group to establish a market reference for each executive position. For fiscal 2023, the Organization and Compensation Committee determined that the appropriate market reference continues to be the market 50th percentile, and that an NEO’s target and actual total direct compensation may be above or below this reference depending on individual factors and performance. We do not formally set total compensation, or any specific element of compensation, at a specific percentile of the peer group for that position. Instead, the market data is used as a reference point to provide information on the range of competitive pay levels and current compensation practices in our industry.

In May 2018, we completed our IPO. As the Company has continued to evolve and mature following its IPO, the Organization and Compensation Committee has correspondingly sought to evolve the executive compensation program as appropriate for a company of Inspire’s stage of development and size. In particular, the Organization and Compensation Committee is in the midst of a multi-year plan to transition the amounts and forms of compensation from those more typical of a private company to those aligned with public companies, including the Company’s peer group.

In the first quarter of 2022, the Organization and Compensation Committee, with the assistance of its independent compensation consultant, took the first step toward growing the performance nature of long-term incentive equity grants by introducing grants of performance stock units, or PSUs. The performance-based metrics, in conjunction with the proportion of total compensation that was variable and at-risk, further enhanced the link between pay and performance for the CEO and other NEOs, as well as strengthened the alignment of the interests of the NEOs with those of our stockholders.

At last year’s annual meeting, 89% of the votes cast on the 2023 “say-on-pay vote” were voted in favor of the proposal. We have considered the 2023 say-on-pay vote and we believe that the overwhelming support of our stockholders for the 2023 say-on-pay vote indicates that our stockholders are generally supportive of our approach to executive compensation.

We are committed to ongoing engagement with our investors on all appropriate matters, including executive compensation and governance. Following the advisory votes at the Annual Meeting, the Organization and Compensation Committee has considered stockholder input in evaluating the design of our executive compensation and the compensation decisions for each of the NEOs.

In order to achieve our objectives, the Organization and Compensation Committee utilizes the components of compensation set forth below. The Organization and Compensation Committee regularly reviews all components of the program in order to verify that each component is aligned with our strategy and ensure that each NEO’s total compensation is consistent with our compensation philosophy.

The primary elements of our NEOs’ compensation and the main objectives of each are:

In addition, our NEOs are eligible to participate in our health and welfare programs and our 401(k) plan on the same basis as our other employees. Each of these elements of compensation for fiscal 2023 is described further below.

The base salaries of our NEOs are an important part of their total compensation package. Base salary is a visible and stable fixed component of our compensation program. In determining base salary levels, the Organization and Compensation Committee considers individual contributions to business outcomes, the scope and complexity of each role, future potential, market data, and internal pay equity. The increases to the base salaries of our NEOs were intended to bring each NEO’s salary closer to the market median for comparable executives in our peer group. The following table sets forth the base salaries of our NEOs for fiscal 2023:

All of our employees, including our NEOs, are eligible to receive performance-based cash incentive compensation. We believe that performance-based cash incentives motivate our employees, including our NEOs, to achieve both short and long-term goals. This approach is critical to the execution of our overall business strategy which, if achieved, has the potential to significantly enhance stockholder value.

In fiscal 2023, with the exception of Mr. Ban, the performance-based cash incentive opportunity available to each of our NEOs was provided pursuant to the terms of our MIP. Given the specific nature of his role as our Chief Commercial Officer, Mr. Ban’s performance-based cash incentive opportunity was commission-based and tied to certain sales-related performance metrics.

Target Opportunities. Consistent with our compensation philosophy and objectives, the Organization and Compensation Committee generally sets the target incentive opportunity under the MIP within the median range of annual cash incentive target pay for comparable executives at our peer group. For fiscal 2023, based on a review of the market data and the individual role and duties for each executive, the Organization and Compensation Committee increased the target incentive opportunity for (a) Mr. Herbert from 90% to 110%, and (b) for each of our other named executive officers, from 50% to 55% (other than for Mr. Weatherby, whose target incentive opportunity was established in connection with his commencement of employment in July 2023). The following table summarizes the target incentive opportunity for each of our NEOs under the MIP:

Performance Measures. Under the MIP, the amount of the payout, if any, is based upon the achievement of financial metrics (weighted 70%) and strategic metrics (weighted 30%). Specifically, the following performance metrics were used to determine payouts under the fiscal 2023 MIP:

Payout Opportunities. At the beginning of the fiscal year, the Organization and Compensation Committee approved the target and performance range for each performance metric. The targets for each performance metric are based on the Board-approved annual operating plan. The targets represented substantial increases from the prior year actual performance. For example, the revenue target represented a 52% increase from prior year actual revenue, and the Global Insurance Reimbursement Approvals represented a 21% increase from the prior year level.

The performance range for each metric defines threshold and above-target levels of performance. The threshold payout for each of the performance metrics is 75% of the target incentive opportunity.

The maximum payout for the revenue metric, operating income metric, and reimbursement approval metric is 200% of the target incentive opportunity for each of those metrics. The maximum payout for the product development, regulatory, quality and operations metrics is 135% of the target incentive opportunity for each of those metrics. Where applicable, and for performance that exceeds the above-target performance level, the resulting payout percentage is determined on a linear interpolation basis up to a maximum payout for the applicable metric. The table below sets forth the weight, threshold, target, above-target, and actual performance for each performance metric:

Payout Determination. At its January 2024 meeting, the Organization and Compensation Committee reviewed and confirmed the Company's performance for each of the performance metrics. The Organization and Compensation Committee then determined the achievement percentage associated with each metric. Following this approach, as shown in the table above, the achievement percentage for the MIP was 83.6%.

In connection with its determination regarding the overall achievement percentage for the MIP, and in light of the Company’s strong financial performance in 2023, the Organization and Compensation Committee approved following two adjustments to the Company’s results:

Taking the foregoing adjustments into account, the Organization and Compensation Committee approved an overall achievement percentage for the MIP of 88.0%. The Organization and Compensation Committee believes that these adjustments are appropriate because they more accurately reflect the operating results of the Company for fiscal 2023, and reasonably recognize the efforts of management and performance results that are believed to be of material strategic importance. Furthermore, the Organization and Compensation Committee considered the magnitude of the adjustments and their effect on total payouts under the MIP and determined that the adjustments were appropriate in size and did not result in a disproportionate increase in the overall achievement percentage. The Organization and Compensation Committee believes that the exercise of discretion based on a qualitative assessment of non-financial, non-formulaic factors, such as those noted above, are consistent with our Company’s culture, compensation philosophy, and objectives in ensuring executive compensation aligns with actual company performance. The Organization and Compensation Committee also believes, however, that the exercise of this type of discretion would be limited to unique or extraordinary circumstances.

The total cash incentive payouts for each executive were determined by summing the products obtained by multiplying the executive’s eligible earnings by his target incentive opportunity and the overall achievement percentage under the MIP. The following table summarizes the total cash incentives earned by our NEOs:

Mr. Ban is eligible to receive commissions based on the achievement of certain sales-related performance metrics, which are determined and paid on a quarterly basis. The Organization and Compensation Committee established the target incentive opportunity for Mr. Ban in reference to the median range for annual cash incentive target pay for comparable executives at our peer group. Following this approach, the Organization and Compensation Committee established Mr. Ban’s target cash incentive opportunity for fiscal 2023 at $240,000.

Under this program, during fiscal 2023, Mr. Ban was eligible to earn performance-based cash incentive compensation based on the following: (i) quarterly global sales, (ii) quarterly global sales plan achievement, (iii) quarterly U.S. new accounts metrics, and (iv) quarterly U.S. implant productivity metrics. The Organization and Compensation Committee selected these metrics based on its judgment that they represent meaningful categories of sales performance tied to our 2023 annual operating plan. The table below sets out the quarterly and annual target opportunities for Mr. Ban for fiscal 2023:

Based on the achievement of the applicable quarterly performance metrics, and consistent with the Company’s exceptional financial results and achievement of sale-related performance metrics during 2023, Mr. Ban earned commission-based cash incentives totaling an aggregate of $253,985, which represents 105.8% of his annual target commission amount. In fiscal 2023, Mr. Ban received quarterly incentive payments of $94,250, $71,200, $34,700, and $53,835.

The actual cash incentives earned by each NEO for fiscal year 2023 are set forth below in the Summary Compensation Table under the columns entitled “Bonus” (for discretionary bonus amounts) and “Non-Equity Incentive Plan Compensation” (for amounts paid under the MIP).

As described above, the third and largest primary component of our executive compensation program is long-term equity incentives. The Organization and Compensation Committee designed this long-term incentive opportunity to motivate our executive officers to achieve multi-year strategic goals and to deliver sustained, long-term value to stockholders. Our long-term incentives create a strong link between payouts and performance and align our executive officers’ interests with the interests of our stockholders. Long-term equity incentives promote retention, as executive officers will only receive value if they remain employed by us over the required term, and they foster an ownership culture among our executive officers by making executive officers stockholders with a personal stake in the value they intend to create.

The Organization and Compensation Committee intends to make grants of long-term incentive awards annually. Special, one-time awards are used in limited circumstances, including, as may be necessary to attract, retain, and motivate experienced and well-qualified executive officers, and as recognition of an increase in the scope of an executive’s responsibilities or major accomplishments. In July 2023, the committee approved special sign-on equity awards to Mr. Weatherby in connection with his hiring as our Chief Strategy Officer, with the awards comprised of stock options and performance stock units each having a grant date fair value equal to $800,000, a portion of which was intended to make him whole in light of compensation he was due to receive from his prior employer.

Equity Vehicles and Mix. Historically, and consistent with the market practice of similar, newly-public companies in our industry, our long-term incentive compensation has consisted solely of stock options. Beginning with fiscal 2022, the Organization and Compensation Committee approved a change in the mix of long-term incentive compensation to be granted to executives. More specifically, the committee determined that long-term incentive compensation would be granted as a mix of stock options and PSUs (each constituting 50% of the target LTI value, respectively). The committee determined that this mix was appropriate given the current stage of our business taking into consideration the relative growth of the Company as we continue to execute our business strategy.