Insulet Corporation

Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation second quarter 2023 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, Deborah Gordon, Vice President, Investor Relations.

Thank you. Good afternoon and thank you for joining us for Insulet's second quarter 2023 earnings call. With me today are Jim Hollingshead, President and Chief Executive Officer, and Wade McMillan, Executive Vice President and Chief Financial Officer. Both the replay of this call and the press release discussing our quarterly results and our guidance will be available on the investor relations section of our website. Also on our website is our second quarter supplemental earnings presentation. We encourage you to reference that document for a summary of key metrics and business updates. Before we begin, we would like to inform you that certain statements made by Insulate during the course of this call may be forward-looking and could materially differ from current expectations. Please refer to the cautionary statements in our SEC filings for a detailed explanation of the inherent limitations of such statements. We'll also discuss non-GAAP financial measures with respect to our performance. namely adjusted growth and operating margins, 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 they are helpful to investors, analysts, and other interested parties as measures of our 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 reported basis with the exception of revenue growth rates, which will be on a year-over-year constant currency basis. With that, I'll turn the call over to Jim.

Thanks, Deb. Good afternoon, and thank you for joining us.

In Q2, we enjoyed another quarter of sustained strong momentum, and we remain on track for another successful and transformative year. The entire global Insulid team is executing at a high level, and we continue to deliver strong financial performance while also achieving several key strategic and innovation milestones. On today's call, I'll touch on four main topics, our strong financial performance, our consumer-focused innovation and clinical achievements, how we're continuing to drive penetration of a massive market opportunity with expanded access and awareness, and the Omnipod 5 international launch. Starting with our financial performance, our second quarter revenue exceeded our expectations with total Omnipod growth of 33%, including US growth of 41%. We also achieved total company growth of 32%. Because of these terrific results, we've raised our outlook for the year. Omnipod 5 continues to disrupt the diabetes technology market as the only FDA-approved, fully disposable, pod-based, automated insulin delivery system. Our flagship offering continues to be the major driver of U.S. revenue growth and was responsible for another record quarter of U.S. and global new customer starts. And Omnipod 5 represented almost 95% of our U.S. new customer starts. Building on our success in the U.S., We are very pleased to have completed the commercial launch of Omnipod 5 in the United Kingdom. We are excited to bring our unmatched AID system to our first international market. Our plans to launch Omnipod 5 in Germany are on track for this fall, with a broader stage rollout across our European markets in 2024. We also meaningfully advanced our clinical and innovation initiatives during the second quarter. We had a formidable presence at ADA in June, where we presented compelling new real-world data from the first year on Omnipod 5 in the U.S. for both Type 1 and Type 2 users. In addition, our U.S. Type 2 Pivotal and U.S.-France randomized controlled trials are progressing well. On the innovation side, we are thrilled to have submitted our 510K to the FDA for the Omnipod 5 iOS app for the iPhone. iOS phone control is one of the most requested features from our customers, and we look forward to bringing this new offering to market in the near term. We entered the second half of the year with clear momentum in our business and a focused strategy to advance our mission to simplify and improve the lives of people with diabetes. Central to everything we do is our drive to deliver consumer-focused innovations. That is why we are incredibly excited about Omnipod 5 and the game-changing technology and experience it delivers. Its benefits are clear. Simple and easy-to-use technology, an unmatched form factor and customer experience, affordability and broad access through the pharmacy channel, and notably, strong real-world clinical outcomes. Omnipod 5 continues to have very broad appeal and is attracting substantial new customer starts across all age groups. In Q2, the mix of Omnipod new customers coming from multiple daily injections and legacy tubed pumps was an estimated 75-25 percentage split compared to our historical 80-20 mix. We continue to capture significant tubed pump switches while also growing pump adoption from those coming from MDI, which is what our Omnipod brand of products was specifically designed for. Omnipod 5 adoption isn't the only evidence of considerable impact on the diabetes community. We are also seeing stable retention rates. We also saw a sizable increase in the number of HCPs who wrote scripts for Omnipod 5 in Q2, which was over 15,000, up from over 11,000 in Q1. That is in a market where there are 7,000 to 8,000 endocrinologists. The power of Omnipod 5 is also illustrated by the ongoing feedback we receive across the diabetes community, from potters to their parents and loved ones to HCPs and other caregivers. We recently heard from a potter who said, quote, since switching to Omnipod 5, I have never looked back, end quote. And an endo at a very large clinic recently informed us that he has changed how he communicates with his type 1 patients. He now strongly recommends AID therapy for all, and in the clear majority of cases, they choose Omnipod 5. Our success building awareness of and access to Omnipod is core to our strategy and ability to continue to lead in the Type 1 and Type 2 markets, both of which remain vastly under-penetrated. The market opportunity is massive. Excitingly, we see Omnipod 5 already contributing to overall pump adoption in the U.S. reinforcing our confidence that Omnipod will drive pump penetration to well over 70% in the Type 1 market alone from the approximate 40% where it is today. The U.S. pharmacy channel also remains a key driver of our success expanding access to Omnipod in the United States. The pharmacy channel simplifies the overall experience for patients and provides more affordable, convenient, and efficient access. The vast majority of our U.S. customers continue to pay less than $50 a month through the pharmacy channel, putting it on par with the customer cost for MDI. And we continue to hear from our customers how convenient it is to get their pods through this channel. We are capturing the market opportunity and improving the lives of our customers through not only our advanced technology and clinical outcomes, but also our product's convenience and simplicity. This quarter, we significantly advanced our clinical initiatives. We had fantastic representation at ADA, including standing room only at our product theater and a record number of leads at our booth. We presented Omnipod 5 real-world evidence demonstrating improved outcomes for children, adolescents, and adults with type 1 diabetes and, for the first time, Omnipod 5 real-world data for adults with type 2. The combined real-world data included 60,000 individuals across all age groups. Every day, we are building real-world evidence that undoubtedly demonstrates that our advanced algorithm and overall system is working exactly as it was designed and improving customers' lives. Our real-world data will be incredibly powerful over time since every Omnipod 5 user is cloud-connected. We can continue to personalize and improve the overall customer experience while also streamlining physician workflows. We will have unprecedented insight into actual population-level usage patterns, which will allow us to constantly improve our offerings and to build on our already market-leading product differentiation. Every day, we are building usage data from our rapidly growing Omnipod 5 customer base, and we will be able to use this private, secure, de-identified data to constantly improve the customer care experience from diagnosis all the way through the course of their lives. we'll be able to learn from usage patterns, increasingly segment our offerings, and drive coaching engines. To put it simply, the better we make the customer experience and streamline workflows, the more we'll have product preference, the more data we'll have, and it will effectively be a data flywheel that builds on itself. This is where we will continue to lead. Nobody else in diabetes therapy can create evidence from data that includes all patients on therapy. As we also mentioned at ADA, we expect to begin enrollment in a matter of weeks for a trial using Omnipod 5 with the Freestyle Libre 2 CGM, which will include up to 200 participants with type 1 diabetes across 18 institutions in the UK, France, and Belgium. It will be a 13-week randomized controlled trial, including those currently on MDI with the primary endpoint of change in A1C. Although not needed from a regulatory perspective, We expect the data from this trial to support our pricing and access initiatives. We are excited that our integration with Abbott's Libre is far along and has advanced to the point where we will soon place study participants on the integrated system. We also announced our first feasibility study of a next generation AID algorithm, which will take place in New Zealand and for which recruitment began last month. This 11-week study will include up to 72 participants aged 16 years and older with type 1 or type 2 diabetes and is designed to assess safety and effectiveness. Our new algorithm work is informed by our incredibly strong usage data, which allows us to continue to advance our system in even more ways than we had originally envisioned. We advanced other major clinical programs during Q2, including our type 2 pivotal study, for which we expect to complete enrollment by the end of the year. As a reminder, this is a three-month study of up to 350 people, making it the largest Type 2 study we have conducted. The feedback we have received from HCPs and study participants is encouraging. HCPs are impressed with how well participants are doing on Omnipod 5, and the participants have strongly expressed their desire to stay on product after the trial's completion. Omnipod Dash has proven to be a game changer for people with type 2 diabetes, and we are confident Omnipod 5 can have an even greater impact on this underserved population. Lastly, our final participant in France is on track to soon complete our Omnipod 5 with Dexcom's G6 randomized controlled trial. Once complete, we will analyze and prepare the data to negotiate access and premium pricing for Omnipod 5 in our international markets. We expect providing this data will be one of many initiatives that will support our Omnipod 5 international commercial launches, which are now underway. While Omnipod 5 is disrupting diabetes management today and is expected to do so for a long time to come, we know a robust innovation pipeline is necessary to drive sustainable long-term growth. We will soon begin our Omnipod Go U.S. limited commercial rollout. which will also include HCPs whom we don't typically call upon and that are, quote, new to Omnipod. This will allow us to test the market and expand our reach. This new-to-market, simplified product will grant us access earlier in the type 2 pathway and addresses critical barriers that can prevent the initiation of insulin therapy, namely fear of needles, as well as challenges with dosing accuracy and consistency. Omnipod Go will expand our addressable market by at least 3 million people in the U.S. alone who require basal-only insulin. We look forward to the key learnings from our pilot program, which will help inform our full market release in 2024. We are very well positioned in the Type 2 market to grow adoption with Omnipod Dash and soon Omnipod Go, not to mention an expected future Type 2 indication for Omnipod 5. We certainly have a number of competitive advantages in this space, including our differentiated form factor, an affordable pay-as-you-go business model, and pharmacy channel access. As a result, we continue to add a substantial number of type 2 patients to our customer base. During Q2, people with type 2 diabetes represented an estimated 20% of our US new customer starts across our Omnipod portfolio of products. Given the tremendous success of Omnipod 5, Our Type 1 customer base is growing at an incredible rate, far outpacing Type 2. However, on an absolute basis, our Type 2 new customer starts increased sequentially. We achieved another major innovation milestone in June with our 510K submission for the Omnipod 5 iOS app. The FDA's review is progressing, and we look forward to continuing to work with the agency so we can provide the iOS platform option to our expanding Omnipod 5 customer base. We are also advancing our integration efforts with both of our CGM partners, allowing us to provide future CGM of choice with Omnipod 5, which we firmly believe is the best AID system on the market. We expect these integrations will be one of many catalysts that fuel our long-term growth and strengthen our value proposition, and most importantly, allow us to continue to execute our mission to simplify and improve the lives of people with diabetes. We continue to expand our intellectual property portfolio, which is a key asset enabling our continued growth. We also actively defend our valuable portfolio of proprietary technologies and innovations as appropriate. As you may know, earlier this year we successfully took legal action against the distribution of EOflow's product in Germany. In that case, the court determined that EOflow infringes Insulet's unique technologies and the court quickly issued an injunction prohibiting EOflow's distributor from further infringing on our patents in Germany. Subsequently, after further investigation, we filed an additional suit last week in the US against Eoflow and other affiliated parties to stop the continued misappropriation of our valuable and proprietary trade secrets, as well as the infringement of our patents and other IP. We not only will enforce our patents when necessary, we also will zealously protect our valuable trade secrets. we are confident we have a clear lead both technically and in terms of scalability, and we will not hesitate to vigorously defend our IP when we see followers misappropriating or infringing on it in an attempt to catch up.

Moving on to our international operations.

We are excited to have commercially launched Omnipod 5 in the UK in June. While it has only been a brief period of time, the market response has been fantastic. Following launch, We saw an almost doubling of our typical customer order rates, and we quickly started a considerable number of Omnipod 5 users throughout last month alone, including both new customers as well as those already on brand. We are thrilled to provide our advanced technology to those who have long been waiting for it. We remain on track to launch Omnipod 5 in Germany this fall, closer to the beginning of the season, with a broader staged international rollout in 2024. By the end of 2024, our goal is to have Omnipod 5 available for the majority of our European customers. In closing, we've reached the midpoint of 2023 and have incredible momentum in our business. We are delivering strong financial performance and achieving key strategic milestones. We've advanced our commercial, innovation, and clinical programs, and Omnipod 5 and our entire business shows no signs of slowing down. We are well positioned to continue to expand access to Omnipod 5 globally and lead the industry in advanced innovation. It's gratifying that others in the industry see our leadership and are attempting to follow our established best in class, fully disposable patch form factor. We are investing for sustained leadership and widespread international expansion. We are transforming diabetes management and we are only beginning to drive our life changing innovations to market.

I will now turn the call over to Wade. Thanks, Jim.

We delivered another strong quarter of financial performance and strategic progress and once again delivered record U.S. and global new customer starts. We generated 32% revenue growth in Q2, finishing above the high end of our guidance range. Our outperformance was driven by global Omnipod growth of 33%. On a reported basis, for total revenue, foreign currency was a 20 basis point tailwind compared to Q2 of last year. U.S. Omnipod revenue growth was 41%, exceeding our guidance range. Revenue growth continues to be driven by our annuity-based model with consecutive record new customer starts and growing U.S. pharmacy volume. This includes an increasing contribution from Omnipod 5 and a premium for the Omnipod 5 and Omnipod dash pods in the US pharmacy, where we provide the personal diabetes manager at no charge. Omnipod 5 ramp dynamics resulted in an estimated net headwind of approximately 4 million. Similar to last quarter, we benefited from an estimated 16 million net volume benefit associated with new Omnipod 5 customers in large part due to existing customer conversions from Omnipod Dash and Classic Omnipod who received their starter kits and first refill orders in the quarter, as well as some initial stocking in retail pharmacies. This estimate is net of some Omnipod 5 customers skipping an order in the period. This benefit was more than offset by a reduction in estimated channel inventory days on hand of approximately 13 million and another 7 million reduction associated with an increase in actual and expected sales returns for Omnipod Dash and Omnipod Classic as retail pharmacies convert their inventory to Omnipod 5. The benefit of the pharmacy channel continues to be a competitive advantage, and we remain focused on driving increased volume through this channel, which in Q2 represented over 90% of our total US volume. International Omnipod revenue increased 15%, in line with our expectations. Growth was driven by continued strong adoption of Omnipod Dash in our international markets as well as a combination of items associated with order and revenue recognition timing that contributed approximately 300 basis points of growth. On a reported basis, foreign currency was a 50 basis point tailwind over the prior year. Our estimated global attrition and utilization remained consistent. Drug delivery revenue increased 18% above the high end of our guidance range due to favorable production fees, and timing. Gross margin was 66.8%, up approximately 320 basis points. Cost of revenue included income of $800,000 due to lower estimated costs associated with the medical device corrections we announced last year. Excluding this benefit, gross margin was 66.6%, slightly above our expectations due to favorable manufacturing costs and higher than expected revenue, including favorable mix. The 320 basis point year-over-year increase in gross margin was primarily driven by a premium from volume growth in the pharmacy channel, improved manufacturing efficiencies, and a decrease in warranty expense. These were partially offset by higher costs associated with Omnipod 5 production higher expected production costs as U.S. manufacturing continues to ramp and become a larger portion of our total production, as well as inflation. Operating expenses were up year over year to support higher than expected revenue and investments in our business to further drive our strong growth trajectory. Adjusted operating margin and adjusted EBITDA were 7.6% and 15.5% respectively. Both exclude the favorable medical device correction adjustment of $800,000, and both were above our expectations due to higher than anticipated revenue and gross margin. Turning to cash and liquidity, we ended the quarter with $660 million in cash. In June, we extended our credit facility four years and increased our borrowing capacity under the facility to $300 million, all of which is currently available. This strong financial position gives us the flexibility to invest in our expanding pipeline and other key areas of our organization and build on our foundation for long-term sustainable growth. Now turning to our 2023 outlook. For the full year, we are raising our expectation for total Omnipod revenue growth to a range of 25% to 28% and total company revenue growth of 22% to 25%. For US Omnipod, we are increasing our revenue growth outlook to 33% to 36% driven by continued strong Omnipod 5 adoption coming from both record new customer starts and ongoing conversions from other Omnipod products as well as recurring revenue from Omnipod Dash and the benefits of our pay-as-you-go model in the pharmacy channel. As a reminder, we have a tougher comparison in the second half of the year resulting from the Omnipod 5 US full market release which started in August of last year. This includes the related 2-script and retail channel stocking volume benefits which were in large part due to the accelerated pace of customer conversions in the second half of 2022. For international Omnipod, we are raising the low end of our range and now expect 7% to 10% constant currency growth. On a reported basis, we estimate a favorable foreign currency impact of approximately 300 basis points. We expect growth will be driven by ongoing Omnipod Dash adoption, partially offset by AID competitive headwinds. We are excited to have kicked off our Omnipod 5 international rollout. As a reminder, given the nature of our annuity model, we expect the Omnipod 5 launches to start inflecting in our growth rate in the second half of 2024. For drug delivery, we are raising the low end of our range and now expect a decline of 50% to 45%, representing a dollar decline similar to what we experienced in 2022. Turning to 2023 gross margin, we continue to expect adjusted gross margin to be in the range of 65% to 66%, consistent with 2022 at the high end. Favorable impacts to gross margin include increasing volume in the U.S. pharmacy channel, geographical sales mix, and improved manufacturing. These drivers are expected to be offset by higher costs associated with our U.S. manufacturing ramp, product line mix due to increasing Omnipod 5 volume, and inflation. As we previously stated, we expect many of these factors to continue to impact our results into 2024. However, we expect gradual improvement over the course of the coming years. We still expect gross margin in the second half of the year to be closer to the high end of the range. Given our market leadership position and large, unpenetrated market opportunities, we continue to expect operating expenses to rise with investments in our commercial, innovation, and clinical efforts and scaling our support functions. We are reaffirming our guide of adjusted operating margin of high single digits and expect it to be closer to the high end of the range. We also expect improvement in the second half of the year over the first half due to timing of investments and improved second half gross profit. We remain committed to margin expansion and anticipate leveraging our investments in 2024 and beyond. We continue to expect capital expenditures to be at a lower level than 2022. Turning to our third quarter 2023 revenue guidance, we expect total Omnipod growth of 20% to 23% and total company growth of 18% to 21%. For U.S. Omnipod, we expect growth of 27% to 30%. Our growth drivers remain the same. the ongoing adoption of Omnipod 5, including the benefits of the US pharmacy channel, and our continued strong new customer starts, as well as the benefits of our annuity model. With strong new customer start momentum, we continue to accelerate sequentially, and as a result, are guiding to strong sequential dollar growth in Q3. For international Omnipod, We expect growth of 2% to 5% driven by ongoing Omnipod Dash adoption and a modest contribution from our Omnipod 5 launch, partially offset by increasing AID competitive headwinds. On a reported basis, we estimate a favorable foreign exchange impact of approximately 800 basis points. Finally, We expect a Q3 drug delivery revenue decline of 30% to 25%. In conclusion, we are delivering solid financial performance, achieving critical milestones, and further positioning Insulet for long-term sustainable growth. We're on track to deliver another strong year of revenue growth and new customer starts, while also investing in key areas throughout our global business in order to drive sustainable growth and long-term value creation. With that, operator, please open the call for questions.

Thank you. If you have a question at this time, please press star, then the one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star one again. We are limiting each participant's question to one. However, please feel free to go back into the queue, and if time permits, we will be more than happy to take your follow-up questions at that time. Our first question comes from Larry Bejelsen from Wells Fargo. Please go ahead. The line is open.

Good afternoon. Thanks for taking the question. Congrats on another nice quarter here. So Jim, I heard you say, you know, you're seeing no signs of slowing down. But as Wade said, you're going to start lapping some tough comps in the second half of this year. The second half, 23 implied worldwide, you know, Omnipod 5, Omnipod, I'm sorry, growth is about 21%. So How do you keep the momentum going at Pod? Do you see yourself as a 20% plus grower beyond 2023? And how are you thinking about these GLP-1s? Thank you.

Thanks, Larry. Thanks for your congrats, too. And thanks for your question. We're not seeing any kind of pause. The new customer starts for Omnipod 5 and the demand for Omnipod 5 continues to be terrific. We obviously had record starts in the quarter. We see a lot of momentum there. across all age groups, as we said. And so we're very bullish on the growth. I know you're asking me a question to guide beyond 23, because you want to ask Wade that question, but I'm actually going to throw this to Wade so he can work through the numbers there for the second half.

Sure. Thanks, Jim. And Larry, you're exactly right. We are almost completing 12 months of Omnipod 5. So it's been incredibly exciting to see the ramp here over the first few quarters. And we've got a couple of one-time things to account for. If you recall in the second half of 2022, the first two quarters of Omnipod 5 were benefiting from a significant contribution from first customers and converting customers getting two scripts in the quarter. And we called those out. They're similar to the benefit we got this quarter, 16 million. What's different is that we're now seeing some reduction in days on hand inventory, as well as some increased return reserves in the pharmacies. So a lot of dynamics playing out in the first year as we ramp up Omnipod 5. But as you call out, we've got a really strong guide, 30% for Q3 and implied for Q4 in the U.S. at the high end of the range. And so we're really excited about continuing to grow Omnipod 5 here at these L

Our next question comes from Robbie Marcus from JP Morgan. Please go ahead. Your line is open.

Yeah, thanks. And I'll add my congratulations as well on a really nice quarter. You know, I hate to waste the question on this, but given the moves in the stocks today, particularly in diabetes stocks, I thought it would be good. Jim, maybe if you want to just address your view on I guess it would be more relevant to type 2 diabetes, particularly increased GLP-1 use. There was some good cardiovascular data today in obesity. You know, just your views on how GLP-1s may or may not impact the progression to type 2 diabetes and basal and intensive insulin and you know, just any impact and help investors frame it to your overall business. I appreciate it. Thanks a lot.

Sure. Thanks, Robbie. I know it's a question of high interest. So as we've said before, we think it's terrific to see the pharmaceutical companies continue to innovate with therapies for people with type 2 diabetes. We get out every day to help people with diabetes, people living with type 1 and type 2 diabetes. So we think it's terrific that innovation is happening across all fronts. And The GLP-1 class of drugs has actually been out for a while, but this latest generation of GLP-1s is clearly having a really big impact and has additional efficacy from the existing class. And obviously, they're off to a great start. So we think all that innovation is really good. Having said that, we're confident it doesn't impact our TAM. And just to give you a couple of reasons why, the first one is the global problem with type 2 diabetes is enormous. There are more than a half a billion people living with diabetes around the world, and that number continues to grow. Most of them have type 2 diabetes. So it's, you know, it's a massive unmet medical need globally and in the U.S., and massively underserved as a population. So that's the first thing. The second thing is when you look at our offerings, even in the U.S. alone, there are two and a half million people living with type 2 diabetes who also need intensive insulin therapy today. So intensive therapy being basal plus bolus. So that's two and a half million people in a U.S. TAM whose condition has progressed to where their relevant target market for us to help them with Omnipod Dash and soon with Omnipod 5. And so we're just scratching the surface of that market. Pump penetration in that market is in the low single digits, maybe the mid-single digits. And the Omnipod platform has a right to win in that market because of its simplicity and its channel access and et cetera. And the other thing I'd point to is that we know that GLP-1 class of drugs has long coexisted with insulin. We saw that in our own Type 2 feasibility trial, which we published two ATPDs ago, a lot of that population that used Omnipod 5 in that trial was already also using. That was an all-comers study in terms of the population. And many, many of those patients were using GLP-1s and still got great benefit from the Omnipod 5 in that trial. So we're very confident that we have a huge market of people who need our help with our Omnipod platform. And when we get the label, it's Omnipod 5.

And we don't see the GLP-1s changing our TAM.

Our next question comes from Margaret Kaser from William Blair. Please go ahead. Your line is open.

Hey, everyone. Thanks for taking the questions, or the questions. I wanted to go a little bit deeper into guidance on the U.S. I know I appreciate your comments to Larry, but the midpoint of the guide obviously is quite sizable relative to the beat this quarter, and you listed a variety of benefits. But can you give us a rough sense on a percentage basis how meaningful each of those impacts is to the guidance range, and then whether you're seeing kind of some more meaningful, I guess, sequential increases in new patient ads? than maybe is, you know, atypical for a traditional, you know, inflate year.

Thanks. Okay, Margaret, I can start that one off and just give you a little bit more insight to how we think about the guidance. You know, the first part of your question related to the impact of the guide, depending on high-end or low-end, the headwind from the tough comp and last year's Omnipod 5 ramp benefits in Q3 and Q4, between a 5% and 10% headwind to our guidance range. But really the reason we have confidence in still being at 30% growth at the high end and continuing to grow at these accelerated rates is the result of our durable business model and the annuity factor. And so we've had record new customer starts for several quarters, which gives us momentum into the second half here. And we're going to continue to build momentum. The high end of our range assumes we'll continue to see record level new customer starts. And given the momentum that we have today, we've got high confidence in doing that. So those are really the major factors. As we called out in our prepared remarks, we see stable attrition and utilization. So we're assuming that continues at the high end as well. We don't see any major impact to attrition or utilization. A couple other things to think about in the second half is we've had a good contribution to the premium moving into the pharmacy channel by converting a lot of our existing customers from the DME channel. We'll still continue to get that benefit. You know, that benefit has grown each quarter as we've moved more and more volume into the pharmacy channel. And again, as we said in our prepared remarks, 90% of our volume is now in the pharmacy channel. So a significant increase from this time last year. And so that premium is benefiting us here and will continue to benefit us in the second half, but it'll be to a lesser extent because we're starting to reduce the number of converting customers each quarter. And as you recall, we have planned to be through most of our existing customers converting to Omnipod 5 in the pharmacy channel. through the end of this year. We think most of those conversions will be done by the end of 23 and we think that will wane and to a lesser extent be a benefit here in the second half. So those are the major changes when you look at the growth rate. But again, we are a volume business and by far the largest contributor to our growth rate is our volume growth, which is based on our customer base growing. And we continue to see that growing with new customer starts throughout the second half of this year again. So, strong guide, strong momentum in the business, lots of tailwinds to help us continue here based on our annuity model.

Our next question comes from Chris Pasquale from Nefron Research. Please go ahead. Your line is open.

Thanks. You're asking the quarter. I want to talk a little bit about the international business and the 05 rollout there. Curious how much of your current international footprint, UK and Germany, represents and I understand the comment about the install-based model and it taking some time to flow through, but if we just look at the U.S. example, the Omnipod 5 launch led to a pretty immediate growth inflection. So why couldn't we see something earlier than back half of next year outside the U.S.?

Thanks, Chris. I'll start with that one, and then maybe Wade will provide some color. So we're really excited about the Omnipod 5 launch in the U.K. It's going really well. I'll just share one story with you. There's so much pent-up demand for Omni 5.5 across our European markets and all of our markets. And one of the clinics we work really closely with had so many customers waiting to get on therapy, they actually put up decorations all over their office and put up a disco glitter ball as they brought people in to get set up on therapy. It was a huge celebration. And as we said in our prepared remarks, our order rate has doubled. So it's off to a great start in the U.K., We're really excited about Germany. As for the percentages, we haven't broken those out. I don't think you'd find them materially different from a lot of medtech markets, but we haven't materially, we haven't broken out those specific numbers for the markets. In terms of, you know, the growth in the U.S. versus the growth in European markets, every market's a little bit different. One of the reasons, maybe the main reason we had such, in effect, unanticipated growth with Omni55 in the U.S. was, you know, it was all of the customer sources in the U.S. were at the high end or above the high end of our expectations. And that's because of the pharmacy channel. So in most of the European markets, customers who are on a therapy are locked into a contract. And in the U.S., if you're locked into a contract with your two pump, you can cross over into a pharmacy benefit. And so that's what that's in the U.S. What's allowed us to have so many competitive conversions in our new customer starts in the European markets. It's a little different everywhere, but it's it's less flexible for patients who are on a therapy. So they have to typically wait for their contract. to come up. So therefore, most of our new customer starts are customers who are new to therapy. And we're getting, you know, some upgrades from our own products. And then we'll be bringing in new customer starts who are converting, but they're converting in that whatever the angle cycle is, whether it's a four-year cycle, in some markets it's a five-year cycle. So when they come available, they're really relevant targets for us to move off of competitive pumps.

But that just changes, it changes the dynamic of the flow.

Our next question comes from Jeff Johnson from Baird. Please go ahead. Your line is open.

Thank you. Good afternoon, guys. Wait, maybe I think we're all trying to, you know, kind of feel you out, obviously, on U.S. growth rates for next year. And I know you're not guiding to next year, but a couple of the moving pieces that you talked about this quarter, that reduction in channel inventory of 13 million to 7 million in returns. You know, how much of that do you think is left to play out to go away as a headwind, maybe as we get deeper into this year and heading into next year? And then I know you keep calling out every quarter this patient behavior of doubling up and getting maybe four months of inventory in a three-month period when you first start 05. But that behavior has stayed pretty consistent now for the better part of a year. So it doesn't seem like there's a whole lot of change going on there. To me, it almost feels like this net kind of neutralizing of those two factors should drop away on the headwind side and maybe you keep a little bit of that tailwind. So I guess my point on all of that is you seem to be guiding into about 25% growth in the U.S. Omnipod business for the back half of this year, obviously a very strong number against that low to mid 40% comp. Is that crazy to think that could be a starting off point on how we think of next year as you get the tough comps? you maybe get a little bit less of that premium upgrade from DME to pharmacy, but you also get a little drop off of those headwinds that I was talking about.

Thank you. Hey, Jeff.

Happy to talk about the guidance a little bit more here and certainly a lot of dynamics moving and you've called out several of them. So why don't we just touch on them, each of them again and make sure it's clear. So when, as we think about the day's inventory on hand, and I'm glad you brought that one up because it is something that we obviously. Don't have control over the distribution channel. Um, and we are seeing the pharmacy channel be more efficient. And so maybe just to summarize what we've seen to date with Omni pod five in Q2 of last year, we saw a $7 million inventory build. And so that was a bit of a headwind for us this quarter. And then we saw really stable inventory days. We've estimated pretty stable inventory days up until last quarter when we saw a reduction in days inventory on hand. And we thought that that was pretty settled out at that point. But then we again saw days inventory on hand, a few days reduction again this quarter. So we're curious to see if this is where the pharmacy distribution channel settles out or if they're down a couple days and we'll see that come back. But we don't factor that into our guidance going forward because we can't predict it. So days inventory in hand from here, we don't know. However, we do see it trending a few days lower than we have seen over the past several quarters. And so there is potential that we could see some of that come back. You mentioned the two scripts. Again, this was another dynamic that we were curious to see how it would play out. As you said, on the growth side of it or the total benefit side of it, we have seen a pretty consistent benefit. But remember, over half of that benefit has been the result of converting Omnipod customers from Dash and our classic Omnipod onto Omnipod 5. And that is starting to ramp down here in the second half. And we're expecting to be through most of that in 2023. So interesting enough, the last two quarters, that benefit has been more than offset by the day's inventory and hand reductions, as well as some are increased to our returns reserve. And so we haven't really seen it as a total net benefit because those dynamics all basically wash each other out. So to your point, if we don't see any more increases in return reserves, and we don't expect that we will, and we don't see any changes to day's inventory and hand, we would assume we'll continue to see a two-script benefit moving forward, but to a much lesser extent as we move into 2024. So all those things together, Jeff, we still think that the largest part of our growth by far is going to be the new customer start metric. And at consistent attrition and utilization rates, it really is a volume business. And that's what we would highlight for you and others here is really focus on those new customer starts, the growing customer base, and how we accelerate volume from here. And that's what gives us confidence to be, even with these pretty strong, tough comps in the second half, to be guiding at 30% at the high end of our range.

Our next question comes from Jason Bedford from Raymond James. Please go ahead. Your line is open.

This is Glenn Schell on for Jason. And I just had a quick question with regard to moving the Omnipod Classic users to Omnipod 5. Where are we in that conversion? And are you seeing higher attrition from the Omnipod Classic as it's discontinued?

Yeah. Hi, Glenn. Thanks, man. Go ahead. No, no, you go.

Okay, sure. Happy to start this one, Glenn. So we are... through most of the Omnipod Classic change to either Dash or Omnipod 5 in the US. And so we have announced in the US that our plan is to move our customers and discontinue the product in the US. Having said that, we're going to wait and see where we're at by the end of the year to make a final determination there. Obviously, we're going to take care of all of our Omnipoders, our customers that have been with us for some time. But they've got great options to move to Dash and Omnipod 5. Given the coverage levels that we have in the pharmacy channel now for both Dash and Omnipod 5, it is a lot easier for our former Omnipod Classic customers to move on to Dash. And so we are not seeing a higher attrition rate. In fact, our early estimates show us that our converting customers are staying with the product and really either classic to Dash or classic to OmniPod 5 in both cases. We've seen that at accelerated rates and the attrition has been really strong.

Our next question comes from Travis Steed from Bank of America. Please go ahead, your line is open.

Hey, thanks for taking the question. Quick clarification, Wade. When I put up all the numbers that you gave in the adjustments, I got to like 48% U.S. growth. I just wanted to clarify that number to make sure that was right once I counted for all the adjustments. And then on the Q4 guide, it looks like if you look at the Q4 implied guide, you're somewhere around 20% U.S. growth. Is that the right way to think about the starting point for 2024 and next year as you think about lapping some of the tougher comps. Thanks a lot.

Hey, Travis. I wasn't quite tracking with you on which quarter for the 48%, but you may be thinking about the net headwind of $4 million, which just adds a couple percentage basis points on a normalized basis to this quarter. So it does benefit us. I think that's the direction you're heading is we do get a benefit because of that net headwind this quarter. And I guess if you're adding in the tough comp for the second half, that also benefits us. But maybe what I would focus on out of your question was just the implied guide for Q4. We don't guide to Q4 at this point. We just do Q3 and Q4. But in that implied guide, you should be near 30% at the high end of the range. And that's our expectation is that given the strong momentum in the business here, we have 30% at the high end of the range for Q3 and close to 30% in the range for the implied Q4 as well. Thanks, Travis.

Our next question comes from Joanne Wunsch from Citigroup. Please go ahead. Your line is open.

Good evening, and thank you for taking the questions. I'm a little bit curious about the timing of the iOS application, the integration with G7, and the integration with L2, and what you think once those next steps come along, you think the benefit may be to the franchise. Thank you.

Thanks, Joanne. We're really excited about all three of those programs. And as you know, as we said in the prepared remarks and we said at ADA, the iOS app is filed with the FDA. And so we're waiting clearance there. And then we'll be prepping for launch as soon as we can, as soon as we practically can. So I'm really excited about that very requested feature. It's interesting. And on that one specifically, there are a lot of customers out there in Omnipod 5 who have made the decision to not hold back. When I talk to physicians out, you know, when I'm out in the field, there's a lot of patients who are carrying their controller on their phone. They want to not have to carry both. And so that's a big requested feature. Having said that, I'm sure there's some people who are waiting for iOS to come on Omnipod 5. So it's hard for us to estimate what that is, but we do think that will give us a boost and will certainly be a big customer satisfier for us and certainly help us, you know, to continue with such great great retention rates and customer experience. So we're really bullish on that. With G7 and with the Freestyle, with our two partners, Avid and Dexcom, the Freestyle family of sensors, obviously, we're working hard, working really well with both of them. Great collaboration with both of them. We want to get the sensor of choice just as quickly as we can. And the programs are proceeding really, really well. As you know, we don't We don't forecast timings or talk about that, talk about timings for those things. But it's obvious we have to be fairly far along with Freestyle Libre 2 to be embarking on that study we're doing in the UK. We're very bullish on that. But the partnership with both of them goes really well, and we're working hard to get those to market as quickly as we can. And we think that both of them provide a boost for us. Obviously, when you think about G7, it's off to a very quick launch. and is a really good customer experience. And when you think about Freestyle, the Freestyle Libre family of sensors is very, very well positioned, particularly in other geographies. And so we think they provide sustained growth for us, and they provide a great customer experience for us to be able to provide that kind of choice as quickly as we can to our customers.

Our next question comes from Steve Lichtman from Oppenheimer. Please go ahead. Your line is open.

Thank you. Evening, everyone. On the HCP prescriber increase, I thought the sequential increase was notable. Can you talk about what you're seeing that's driving that prescriber expansion? Is it use of Omnipod 5 and Type 2 even before formal labeling there? And are you calling on these HCPs, or is this sort of more organic?

Thanks. Thanks, Steve. Yeah, we're really heartened to see that.

I think that there are a number of things driving it. The first one is, Omnipod 5 is just so accessible as a product and as an experience. And we're seeing increasing confidence with the writing of prescriptions for Omnipod 5 across the whole range of ACPs. So you'll see, you know, endocrinologists and physicians writing those scripts. You'll see, you know, nurse practitioners, physician extenders, physician assistants writing those scripts. So it's very broad. And it's because of the ease of use of Omnipod 5, it's an easy thing to write for. And that's what we're seeing in the expansion of our prescribing population. And I'll tell you, the interest is really robust all across the board. And so just as an example, you know, our team was just down in Houston over the weekend at the ADCES conference, which is the conference for diabetes educators. And we just had phenomenal interest in the product platforms. And in Omnipod 5, all of our workshops and showcases were, you know, sort of standing room only attendance beyond you know, what was, you know, like better, bigger than the room space kind of attendance. And that just demonstrates the broad reach and the ease of use of the Omnipod 5 product, which is, of course, a huge advantage for us because the pod platform, the pod experience is so easy compared to our two competitors.

And that's why we're seeing the expansion of prescribers in the market. Jim, I can pick up on the type 2 part of Steve's question as well. You know, as you saw in our reported results here, Type 2 making up 20% of our new customer starts, and that's a tick up from what we've seen the last three quarters. We've been running in that 15 to 20%. And so with a record new customer start quarter, we are still seeing good new customer starts. That is partially driven by Dash, but as you said, HCPs are writing for Type 2. We cannot market for Type 2 yet. As you know, we do not have the label. And so we don't condone it by any means. And our team is working incredibly hard, as Jim touched on in his prepared remarks. to get our type two pivotal trial for Omnipod 5 completed and submit that to the FDA so that we can get on label and start to market type two for, or Omnipod 5 for type two patients. And so it is certainly core to our strategy and a lot of people with diabetes with type two that we would like to bring Omnipod 5 to and we're certainly working as hard as we can to do that.

Our next question comes from Josh Jennings from TD Cowan. Please go ahead, your line is open.

Hi, good afternoon. Thanks for taking the questions. I wanted to just ask about a segment of the new patient starts and just on competitive pump conversions. Do you have any data on those conversions being end of warranty conversions versus middle of warranty conversions and how that's trending and then potentially just how you're thinking about a direct-to-consumer campaign for Omnipod 5. Any historic successes with DTCs in the past as a reference would be helpful too. Thanks a lot.

Sure. Hi, Josh. I can start that one on the new customer start question and pass it to Jim for an update on our DTC or direct-to-consumer strategy. So, we continue to see strong competitive conversions. Although the mix has changed in our reported numbers somewhat, the total number of competitive conversions continues to be strong and certainly elevated above the levels that we saw before Omnipod 5. And so we don't break out the specific numbers for you there. We don't actually track from them whether they're in warranty or not in warranty. That's just not part of our data set. We just know um customers that tell us if they're converting from a competitive pump or not so we don't have that insight for you josh even to give any color on in warranty or out of warranty you know we make estimates but it'd be um too much of a stretch to to try to quantify that um and then jim maybe a little bit on our dtc strategy yeah yeah yeah thanks for the question josh that dtc is a very effective tool for us and we're really confident that we have a strong return on investment in our dtc programs

One thing that I'll just flag is that DTC doesn't just mean TV for us, right? We have a very robust mix of the way we reach out to customers and consumers. And, you know, that includes social and includes, you know, what's called over the top or streaming media. It'll include, you know, more broadcast TV and it includes influencers. We have a really active campaign with influencers and so on. And we have a really good sense of which levers to pull and so on. And, you know, I'm very confident in what our team is able to produce and, We're getting really good at dialing it up and down based upon the results. And so you'll continue to see us doing VTC campaigns. You might periodically see us ramp up on TV as we feel like we need to.

But we have a very broad mix and a very, very effective approach to it.

Our next question comes from Matthew O'Brien from Piper Sandler. Please go ahead. Your line is open.

Thanks for taking that question. I know we're getting a little late here. Just, you know, Wade or Jim, just as you talk about the key growth drivers for the business being on the volume side, if I think back, I think it was three or four quarters ago, 60-40 was the split between MDI and conversions, and then 70-30, I think, last quarter, now 75-25. So what I'm asking for, and I know the denominator is getting a lot bigger, but are you seeing any kind of slowdown in your ability to convert competitive pumpers right now? I don't know if it's because of Medtronic being in the market or something like that, and then It seems like the enthusiasm for O5 from the MDI patient population is as strong, if not stronger, than this time last year when we first launched it. Is that fair? Just maybe talk about the trajectory of those two groups of patients. Thanks.

Thanks, Matt. We're not seeing any kind of pause in the enthusiasm for Omnipod 5, and we continue to garner a lot of competitive conversions from both of our two competitors. And so, you know, the patient demand is really strong. Physician demand is really strong. And it's across all age groups, really interestingly. And so, yeah, no pause. Great positioning. And I've already forgotten the second half of your question. Can you repeat the second half of your question for me? Yeah. Go ahead, Matt.

Sorry. The enthusiasm around O5 within MDIs, is it even stronger?

Oh, within MDI, yeah. Yep. Yeah, that's, if anything, the enthusiasm is even stronger. You know, we're seeing record new customer starts. We're seeing, you know, the percentage mix is changing more because of MDI, NCS on the top, right? And so I think we're just so well positioned and, you know, we're not, it's the momentum for the business is terrific. And Omnipod 5 is just very, very broadly adopted and accepted. I'll give you an example. I was just out in the field last week and I was in a pediatrics clinic, sitting with a physician who's been writing for us and for one of our main competitors for a long time. And she said to me, listen, Omnipod 5 is so good that at this point, I'm not writing really for your competitive pump unless somebody specifically asked for it. And not just that, but everybody I've converted from the competitor pump on Omnipod 5 just does better. And I started to probe around why and the details. They just do better. They just have better outcomes. They have a better experience. And so You know, I think that's a really good sign for us in terms of how the learning curve of the market, you know, here a year in, I think the market has learned a lot about Omnipod 5, how easy it is to use, what kind of great real-world outcomes it's driving. And we just see a ton of momentum across age groups and across all sources of customers, including MDI.

Our next question comes from Danielle Antelfi from UBS. Please go ahead. Your line is open.

Hey, good afternoon, everyone. Thanks so much for taking the question. Congrats on continuing to deliver really strong results here. Wade, this question I think is for you, and it's, again, appreciating you're not giving guidance for 2024, but just qualitatively looking at the different potential tailwinds that could offset some of the, you know, headwinds from a comp perspective and the benefit from the two scripts for every new patient added in 2023. And just want to make sure we are thinking about these offsets correctly. So, thinking, appreciating not giving time, but L2, G7 integration will come. You have to go. Like, maybe walk us through qualitatively how to think about the headwinds and tailwinds that will be coming international from a tailwind perspective in 2024. Thanks so much.

Yeah, it's a great way to look at it, Danielle. And I think you're right. The tailwinds vastly outweigh the headwinds for next year. As we think about the business where we sit today, after halfway through 2023, we've had really strong new customer starts for several quarters. So that gives us great momentum into the second half. I think the answer to your question will lie in the second half. If we continue to see strong new customer starts, record new customer starts in the second half of this year, That will give us great momentum into next year. And then as you teed up there, we have a significant pipeline of new innovations teed up. We haven't given the timing on those, whether they'll be 23 or 24, even beyond yet. But as those new innovations start to layer in, and of course, with our annuity model, they don't have an immediate sizable increase, but they do start to help us accrue more customers over time. And so we're going to continue to build momentum. On the other side of the coin, obviously, AID competition is really strong for us outside the U.S. on the international side. And so what we provided an update in our prepared remarks today is that as a result of lower new customer starts than we've usually had internationally, we've got lower growth rates to contend with there for the next four quarters so that you can see our guide for the second half for international. And that'll to continue into the first half of 24. But given Omnipod 5 launching internationally, and we're going to add more countries next year, we expect the second half to start to inflect internationally. And so now we've moved into the mid to low single digits. We think the second half of next year should be approaching that high single digits, low double digits type of range. And so again, we're not providing specific guidance. But that gives you a feel for what we think is really strong momentum for the U.S. and improving positioning as we'll be able to compete in the AID side of the market internationally better at the end of this year and into next year. And then as that builds into the annuity model, we'll see an inflecting growth rate in the second half of 2024 internationally. So with all that in, again, it's such a dynamic launch here. We know it's going to be strong. We just don't know how strong. And so we can't provide numbers at this point. We'll typically give some color at the end of the Q3 call on what we're seeing going into 2024. And then we'll provide our guidance like we do every year for 2024 at the end of the Q4 call.

Our next question comes from Matt Taylor from Jefferies. Please go ahead. Your line is open.

Good afternoon. This is Mike Stark calling on for Matt. Thanks for taking the question. Just had a question on Omnipod Go. Can you just talk about what's left to do commercially ahead of the full market release in 2024, and maybe comment on how you're thinking about the financial contribution next year? Thank you.

Sure. I'll start on the pilot plan, and then I'll let Wade talk about financial contribution. So we're really bullish on getting that market out in the hands of our pilot physicians and clinics. Um, and you know, the great thing about go is that it solves a lot of problems for people who are initiating insulin therapy. As we said before, it resolved the needle phobia. It resolves dosing and so on, but it's new to world and it's new for us. And it's new for those clinics because some of those clinics are places where we don't necessarily have a very strong. All point footprint. Um, and so what we need to do is get it out in the clinics. We'll need to, we need to go out, you know, educate the clinics on the use of go, which is incredibly simple experience. And we need to kind of test the waters with a couple of things about the dosing SKUs and some other things. So we need to see it in the real world, in the hands of the clinics, in the hands of our reps, and make sure we just have, you know, we have the approach to the selling pitch correct, make sure we understand how to support the clinics that we're going into and so on. And, you know, we're giving ourselves time because it's a new to world offer and it's a new, there's some things about it that are kind of new commercial model for us. And so that's why we're saying, We're going to pilot it here in the near term. We're going to learn what we learn, give ourselves some time to adjust and then commercialize in 2024. And Wade, if you want to talk about what we're modeling for financial impact.

Yeah. So, Matt, we would love to know where Omnipod Go is going to go in 2024. We have many financial scenarios internally. But as Jim just said, we're going to take our time. We want to do this right. It's a new to world product. And so it's really difficult to know how fast Omnipod Go will ramp We've obviously got the limited market release, as Jim said, this year. We're going to learn a lot there, and that's going to help us start to dial in our models for 2024. But I think at this point, I would stay really thinking about Omnipod Go as a light contributor to our 2024 growth rates. And let's just give it some time to see how fast it does ramp And when it starts to become a material contributor, that's when we certainly will start to layer it into our guidance. And we'll talk about more of it from a financial contribution standpoint.

But until then, just given the new to world concept, we're not going to be communicating financial numbers for it at this time.

And we have time for one last question. It will come from Matt Mixick from Barclays. Please go ahead. Your line is open.

Hey, thanks so much for squeezing me in here. Just one maybe follow-up on that Omnipod question. That's just, you know, maybe as you build inventories, you know, is that something that we're expecting to show up in any of your sort of, you know, days inventory numbers, understanding that it's a pilot launch, but you, I'm sure, want to be prepared for demand to pick up. and I'll just leave it at that last follow-up, but thanks so much for squeezing me in.

You bet, Matt. So, Wade, I can certainly take that one, and it is something that our teams are working through today, and in fact, we're going to learn a lot through this limited market release. One of the key things or key learnings that we're working on is what is the optimal staging or building of inventory in the channel to support the Go launches and But I think just qualitatively, you're right. Just like with OmniPod 5, we're going to have enough inventory in the channel to serve the customers. And so like we saw in Q2 last year, when we did the limited market release for OmniPod 5, we called out a day's inventory on hand build for OmniPod 5. Assuming the same plays out for OmniPod Go, we'll let you guys know if there's a material amount of inventory that has to go into the channel to launch with OmniPod Go. But nonetheless, it's an exciting program. The teams internally are really excited to see how the limited market releases go. We're going to learn a lot. There's certainly a very large market, an underserved market that needs better technology. We are the natural owner. We've got many benefits with Omnipod and our auto injection, as well as our fluid mechanics. And I think the teams have done a really nice job of simplifying the Omnipod for this group of customers. And so we'll see how the limited market releases go. We'll have probably a lot more to say after that as we start to get into more of a full market release in 2024.

I'm showing no further questions at this time. I would like to turn the conference back to Jim Hollingshead.

Thanks, everyone, for joining us today.

We are incredibly proud of the milestones we've achieved and the progress we've made. And thanks to our disruptive offerings and dedicated team, we're further along than our original expectations and setting our sights higher than ever before. Insulet has come a long way, and we are energized by the enormous market opportunity we're pursuing and the opportunity to drive rapid growth and substantial value for Insulet shareholders while fulfilling our mission to improve the lives of people with diabetes around the world. We look forward to continuing to update you on our progress over the year and next quarter.

Thank you all for joining and have a great evening.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.