Timothy P. Herbert
About Timothy P. Herbert
Timothy P. Herbert, age 62, is Chairman, President and Chief Executive Officer of Inspire Medical Systems, Inc. (INSP), serving as director since 2007 and assuming the combined Chair/CEO role in 2024 . He holds a B.S. in Electrical Engineering from North Dakota State University and an MBA from the University of St. Thomas . Under his leadership, Inspire delivered 2024 revenue of $802.8 million (+28% YoY), first full year of profitability with net income of $53.5 million and diluted EPS of $1.75; 2024 gross margin was 84.7% and operating income was $36.1 million . Total shareholder return (TSR) was -8.9% in 2024, with cumulative TSR since the May 2018 IPO of 642.1% .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Inspire Medical Systems, Inc. | President & Chief Executive Officer; Founder | 2007–present | Founded Inspire; instrumental in developing core neurostimulation technology and leading capital formation strategies . |
| Medtronic plc | Management positions across product development, clinical research, sales, marketing, reimbursement | 1996–2007 | Built deep device expertise and market access capabilities relevant to Inspire’s growth . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| — | — | — | No other public company directorships disclosed for Herbert . |
Fixed Compensation
| Item | FY 2023 | FY 2024 |
|---|---|---|
| Base Salary ($) | 690,000 | 725,190 |
| Target Bonus (% of Base) | 110% | 115% |
| Actual Annual Incentive Paid ($) | 667,920 (includes 83.6% MIP achievement plus 4.4% adjustment) | 820,625 (98.4% MIP achievement) |
Performance Compensation
| Metric | Weight | Threshold | Target | Above-Target | Actual | Payout Basis |
|---|---|---|---|---|---|---|
| Global Revenue ($mm) | 50% | 770.0 | 820.0 | 861.0 | 802.8 | Weighted achievement 45.7% . |
| Adjusted Operating Income ($mm) | 15% | 125.0 | 143.4 | 157.9 | 152.1 (GAAP op inc 36.1 + exclude $116.0 SBC) | Weighted achievement 18.2% . |
| Global Insurance Reimbursement Approvals (#) | 10% | 19,000 | 24,000 | 29,000 | 23,017 | Weighted achievement 9.5% . |
| Quality, Regulatory & Product Development (objectives) | 15% | 2 of 4 | 3 of 4 | 4 of 4 | 3 of 4 | Weighted achievement 15.0% . |
| Operations (Days inventory on-hand) | 10% | 45 days | 90 days | 135 days | 90 days | Weighted achievement 10.0% . |
| Overall Achievement (%) | — | — | — | — | — | 98.4% . |
Long-term incentives for 2024 were granted as 50% PSUs, 25% stock options, 25% RSUs, with PSU metrics based on 2024–2026 cumulative revenue (75%) and operating income (25%); vesting is three-year cliff for PSUs, 4-year graded for options, and 3-year graded for RSUs . Herbert’s 2024 target LTI grant date values: PSUs $3.30 million, options $1.65 million, RSUs $1.65 million (total $6.60 million) .
| Equity Component | 2024 Allocation | Vesting | Grant Detail (Herbert) |
|---|---|---|---|
| PSUs | 50% | 3-year cliff | 16,934 target PSUs; metrics: cumulative revenue 75%, operating income 25% . |
| Stock Options | 25% | 25% after 1 year, then monthly over 36 months | 13,755 options @ $194.87 strike (10-year term) . |
| RSUs | 25% | 1/3 annually over 3 years | 8,467 RSUs . |
2022–2024 PSU results paid at 200% based on cumulative revenue of $1,835.5 million vs max threshold ≥$1,800.0 million; Herbert vested 18,458 shares on Feb 24, 2025 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 298,490 shares; 1.0% of shares outstanding (includes 63,658 held by a trust and 221,356 shares underlying options exercisable within 60 days) . |
| Shares Pledged | 39,390 shares pledged as collateral under a line of credit; pre-approved per Insider Trading Compliance Policy . |
| Ownership Guidelines | CEO required to hold ≥3x base salary; company reports executives attained minimum ownership as of Dec 31, 2024 (exceptions listed do not include Herbert) . |
| Outstanding Awards (selected) | Exercisable options: 84,943 @ $42.15 exp 2028; 64,062 @ $71.00 exp 2029. Unexercisable options: 43,200 @ $194.82 exp 2030; 17,773 @ $227.53 exp 2032; 20,439 @ $263.16 exp 2033; 13,755 @ $194.87 exp 2034 . |
| Unvested RSUs & PSUs | RSUs: 8,467 (2024 grant). PSUs: 5,699 (2023 grant at threshold), 8,467 (2024 grant at threshold). 2022 PSUs (18,458) vested Feb 24, 2025 at 200% . |
Anti-hedging and anti-pledging policies prohibit hedging and margin purchases; pledging is prohibited unless pre-approved by the Audit Committee (officers/directors) .
Employment Terms
| Provision | Terms |
|---|---|
| Employment Agreement | At-will; one-month notice for terminations without Cause or resignations without Good Reason . |
| Severance (no Change in Control) | If terminated without Cause or resigns for Good Reason: 12 months base salary + pro rata target annual bonus; subsidized COBRA for 12 months . |
| Severance (Change in Control, double trigger) | If terminated without Cause or resigns for Good Reason within 12 months post-CIC: 18 months base salary + target annual bonus; subsidized COBRA for 18 months; full acceleration of outstanding equity . |
| Non-compete / Non-solicit | One-year non-compete and employee non-solicit post-termination . |
| 280G Cutback | Payments reduced to avoid excise tax if it results in greater after-tax value to executive . |
| Potential Payments (as of 12/31/2024) | CIC termination: total $12,196,960 ($1,921,754 cash, $10,243,728 equity, $31,478 other) . Retirement cash (MIP) $820,625; equity acceleration values detailed in table . |
Performance & Track Record
- 2024 highlights: revenue $802.8 million (+28% YoY), net income $53.5 million, diluted EPS $1.75, gross margin 84.7%, operating income $36.1 million; FDA approval of Inspire V and surpassed 90,000 patients treated .
- TSR: -8.9% in 2024; cumulative TSR since IPO 642.1% .
- Pay-versus-performance disclosure shows PEO compensation actually paid and linkage to revenue and net income; say-on-pay support was ~97% at 2024 annual meeting .
Board Governance
- Board leadership: Combined Chair and CEO since 2024; Lead Independent Director (Gary L. Ellis) appointed in 2024 to provide independent oversight .
- Board structure: Classified board (staggered three-year terms), plurality voting with a resignation policy in uncontested elections; supermajority voting for certain charter/bylaw changes .
- Committees: Audit; Organization & Compensation; Nominating & Corporate Governance; Quality, Product Supply & Technology (added Feb 6, 2025). Herbert does not serve on standing committees; committee memberships and chairs are independent directors .
- Attendance: In fiscal 2024, each incumbent director attended all Board and committee meetings on which they served .
- Independence: 8 of 9 current directors (other than Herbert) are independent under NYSE rules .
Director Compensation (for non-employee directors)
- Cash retainers: Board $50,000; Chair +$50,000; Lead Director +$32,000 (added May 2024); committee chairs/members per policy including new QPT committee retainer (Chair $15,000; members $7,500) .
- Equity: RSUs at initial $270,000 (3-year vest) and annual $180,000 (1-year vest); immediate vest on Change in Control .
Other Directorships & Interlocks
- No other public company board roles disclosed for Herbert .
- Compensation consultant: Aon’s Human Capital Solutions engaged; committee independence and no conflicts disclosed .
Compensation Structure Analysis
- High variable pay: ~91% of CEO target total direct compensation is variable and at-risk (MIP + PSUs/options/RSUs) .
- Shift in LTI mix: Addition of RSUs in 2024 alongside PSUs and options, aligning with peers and reducing risk vs options-only programs .
- PSU design: Multi-year metrics on cumulative revenue and operating income, with 0–200% payout; 2022–2024 cycle paid at 200% .
- Stock ownership and clawback: Ownership guidelines (CEO 3x salary) and SEC/NYSE-compliant clawback policy adopted .
Related Party Transactions & Risk Indicators
- Related party: Cost-sharing agreement for suite at a venue with an entity controlled by the CEO; company reimburses 50% (~$0.1m expense in Q3 2025; $0.3m YTD) .
- Legal proceedings: Securities class action dismissed with prejudice (Mar 24, 2025); derivative case voluntarily dismissed; DOJ CID under False Claims Act received Jan 17, 2025 relating to marketing/promotion/reimbursement practices; cooperating, outcome uncertain .
- Pledging: Herbert has 39,390 shares pledged; allowed only with Audit Committee pre-approval; pledging is a governance risk to monitor .
- Dual role: Combined Chair/CEO could raise independence concerns; mitigated by Lead Independent Director and robust committee structure .
- No tax gross-ups; double-trigger CIC vesting; strong say-on-pay support (~97%) reduces immediate governance pressure .
Compensation Peer Group & Say-on-Pay
- 2024 peer group includes medical technology companies (e.g., Insulet, Lantheus, Haemonetics, Globus, Merit Medical, etc.); Inspire’s market cap above 75th percentile in prior benchmarking .
- Say-on-pay: ~97% support at 2024 annual meeting .
Expertise & Qualifications; Work History
| Attribute | Summary |
|---|---|
| Education | B.S., Electrical Engineering; MBA . |
| Technical/Industry | Decades in medical devices; led development/commercialization of neurostimulation therapy for OSA . |
| Capital Markets | Led equity financing and stock offerings; financial acumen recognized in board qualifications . |
| Tenure | CEO since 2007; Director since 2007; Chair since 2024 . |
Compensation Committee Analysis
- Committee composition: Independent directors (Broader–Chair, Burks, Ellis, Tansey); oversight of CEO/NEO compensation, stock ownership guidelines, clawback; engaged independent consultant (Aon) .
Investment Implications
- Alignment is strong: High proportion of at-risk pay with PSUs tied to multi-year revenue and operating income; 2022–2024 PSU payout at 200% underscores execution on growth .
- Watch for selling pressure: PSU vesting in Feb 2025 (18,458 shares for Herbert) and scheduled RSU/option vesting create potential liquidity events; note pledged shares increase sensitivity to price declines and lender covenants .
- Governance mitigants: Lead Independent Director, independent committees, ownership guidelines, and clawback policy balance dual Chair/CEO risk; strong say-on-pay support reduces near-term shareholder activism risk .
- Legal/regulatory overhang: DOJ CID and ongoing IP litigation introduce headline risk; traders should monitor disclosures for resolution timelines and potential financial impacts .
- Operating trajectory: 2024 profitability with robust margins and regulatory product advances (Inspire V); however, management flagged patient/physician delays and customer destocking around Inspire V rollout that may affect near-term revenue cadence through early 2026 .