Insulet Corporation

Good afternoon, ladies and gentlemen, and welcome to the Insolent Corporation third quarter of 2020 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero, on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Devin, Vice President, Investor Relations.

Good afternoon, and thank you for joining us for Insulate's third quarter 2020 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer, and Wade McMillan, Executive Vice President and Chief Financial Officer. The replay of this call will be archived on our website and the press release discussing our third quarter 2020 results and fourth quarter and full year 2020 guidance is available in the IR section of our website. Before we begin, I'd like to inform you that certain statements made by insolates during the course of this call may be forward-looking and could materially differ from current expectations. We ask that you please refer to the cautionary statements contained in our SEC filings for a detailed explanation of the inherent limitations of such forward-looking statements. We'll also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance, and we believe that they are helpful to investors, analysts, and other interested parties as a measure of our comparative operating performance from period to period. Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year basis, and all revenue growth rates will be on a constant currency basis. And with that, I'll turn the call over to Shaci.

Thanks, Deb. Good afternoon, everyone, and thank you for joining us. On today's call, I'll update you on our progress with our strategic imperatives and the many reasons we're excited about the future. Wade will discuss our financial results and outlook for the rest of this year, and then we'll open the call to your questions. We remain in challenging unprecedented. The progress we've made despite this challenging environment demonstrates the durability of our recurring revenue business model, Omnipod's differentiated form factor, and the commitment and resilience of the Insulet team. Together, our team has cared for our users who need our support, advanced our innovation pipeline, and delivered another remarkable quarter on all aspects of our business. We achieved third quarter revenue growth of 20%. Our U.S. and international Omnipod product lines each achieved another record revenue quarter. New customer starts were stronger than expected, and we now expect to deliver our fifth consecutive year of 20% revenue growth despite the pandemic. We also expect to finish 2020 above our pre-COVID expectations at the start of the year. While delivering strong performance, we are also building a foundation to adoption in our enormous and growing market over the long term. In just the markets we currently serve, there are approximately 10 million people living with insulin-dependent diabetes who could benefit from improved quality of life and better outcomes with Omnipod. This market opportunity will grow significantly as we move into new geographies, expand awareness and access to our technologies, and bring our game-changing oriented innovations to market. Our long-term growth will be supported by the manufacturing expertise required to produce the highest quality products while increasing gross margins. We are investing in each of these areas to build enduring advantages that will enable us to improve the lives of people with diabetes for many years to come. I'll start with expanding access and awareness. We are establishing market access so Omnipod is easily available regardless of age, type of diabetes, or payer. Our access through the U.S. pharmacy channel offers customers an unusually simple onboarding experience. Benefit checks are swift, Copays are low and don't come with a large one-time cost, and virtual training is quick and effective. While COVID-19 has presented challenges, it also has pushed us to embrace virtual training, which is now preferred by users and providers. We have newly developed capabilities to continue to provide value as we scale our business. Approximately 80% of our new customers in the third quarter were multiple daily injection users, attracted to Omnipod's ease of use and unique form factor. Additionally, approximately one-third of our US new customers were Type 2, up from last quarter. Fueling the success with MDI and Type 2 is Omnipod Dash. Launched 18 months ago, awareness of Omnipod Dash's unparalleled simplicity has grown and we have built broad pharmacy access in the United States. By the end of Q3, we had secured coverage for 65 to 70% of covered lives for Omnipod Dash. With Omnipod Dash in the pharmacy, MDI users no longer pay large upfront costs or get locked into a four-year contract to try an insulin pump. They can start on Omnipod with a free trial and no lock-in period. We are thrilled to be knocking down barriers and enabling Omnipod to bring improved quality of life and outcomes to more people with diabetes. Given our progress on establishing broad market access through the pharmacy channel, the time was right to launch a small-scale direct-to-consumer advertising pilot. We launched the pilot in September and have been learning a ton. While our DTC is working to raise awareness, we are still monitoring key performance metrics such as lead conversion rates and retention of DTC-generated customers. We know increased awareness is key to growing adoption, and we are delighted to be in such a strong position to invest and explore this area. While our world has been challenged with the pandemic, our team has not missed a beat in advancing our innovation pipeline. Omnipod 5 is the world's first tubeless wearable AID system and the only one fully controlled by a user's mobile phone. With Omnipod 5, we will give our customers freedom, simplicity, and integration with personal consumer technology like no other system on the market today. Our automated insulin delivery platform is transformative technology with potential applications in a variety of segments, Our initial launch of Omnipod 5 for type 1 diabetes users aged 7 plus marks our first step. We are excited about the impact it will make in the market and on the lives of people with diabetes. Over time, we will be investing in clinical studies to first explore and then prove Omnipod 5's utility in more market segments. We are thrilled to have recently completed our Omnipod 5 pivotal trial and remain up to launch in the first half of this coming year. While our team prepares for FDA submission, virtually all of the trial participants have transitioned into a pivotal extension phase. They will remain on product and provide us with critical additional data to support Omnipod 5's value proposition with payers and with clinicians. This data will also help inform our future innovations beyond Omnipod 5. We are to share our clinical results, and given ATTD has been delayed, we are evaluating the best alternative to do so. Our Omnipod 5 preschool pivotal study with two to six-year-olds is underway with all 80 participants on product. Omnipod ranks number one within this demographic, and we are delighted to have kicked off our pivotal study to make Omnipod 5 available down to age two. Our goal is to have the expanded in by the end of 2021 for this young population and their caregivers. Additionally, following the FDA's acceptance of our Type 2 clinical study protocol in September, we began enrollment. This feasibility study will include 30 to 40 participants, each wearing Omnipod 5 for approximately two months. As we learn more from our growing Type 2 user base, we know there is a large market for a Type 2 AID system. We are confident an Omnipod AID system will provide great value for the Type 2 population, and we expect our early clinical work will result in important learnings. Omnipod's form factor, our pay-as-you-go model in the pharmacy, and our experience developing exceptionally simple products position us uniquely to grow pod use among Type 2 users. While we prepare for Omnipod 5's submission and launch, we are also making progress on our future products. We are advancing our collaborations with Dexcom and Abbott, who are rapidly and meaningfully raising awareness of diabetes technology among Type 1 and Type 2 users. CGM is helping users recognize that they need better insulin delivery solutions. And CGM adoption is paving the way for generations of Omnipod products to meet these needs. In addition to integration with our next-generation sensors, We have exciting work underway to make Omnipod 5 compatible with iOS, and we continue to advance our algorithm to expand our lead in simplicity and ease of use. Now, turning to our progress in our international markets. We have seen a gradual recovery in our European markets, and in September, we announced the full commercial rollout of Omnipod Dash. Teams have done a remarkable job preparing our markets to support this launch, and our customers are loving the product. Now, 100% of our new customers in Europe start on Omnipod Dash. In September, we announced the start of our geographic expansion efforts, and we are on track to enter five new markets by early 2021. We're taking a deliberate approach to our international expansion as we build our capabilities and leverage our existing teams and strong distributor relationships. While it will take time to broaden our presence, over the longer term, our expanded global footprint will significantly increase our total addressable market. Finally, turning to operational excellence. In order to meet the growing demand for Omnipod, We are increasing capacity in both the United States and China. We're considerable progress with the ramp of our first two highly automated U.S. manufacturing lines, and we are nearing completion of our third line installation, which we expect will produce sellable product next year. We have also made an investment in another contract manufacturer in China, allowing us to leverage our local supplier base and highly experienced team to quickly scale. These investments strengthen our global manufacturing by chain operations and ensure that over the long term, we have the capacity and redundancy to meet increased global demand for our products. In summary, the world remains challenged with the impact of the global pandemic. However, the compelling benefits of Omnipod the uniqueness and durability of our recurring revenue model, and the outstanding execution of our team provide significant insulation for Insulet. We delivered strong financial and operational performance, and we are taking the appropriate steps to expand our innovation pipeline, grow our addressable markets, and enhance our global manufacturing capabilities. Our team is focused on finishing the year strong and sustaining our momentum as we move toward launch of Omnipod 5 in the first half of 2021. And most importantly, we remain on improving the lives of people living with diabetes. I will now turn the call over to Wade.