Insulet Corporation

Good afternoon, ladies and gentlemen, and welcome to the Insulate Corporation fourth 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 INFLUIT's fourth quarter and full year 2023 earnings call. With me today are Jim Hollingtad, President and Chief Executive Officer, and Lauren Budden, our Interim Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our 2023 results and 2024 guidance will be available on the investor relations section of our website. Also on our website is our fourth quarter supplemental earnings presentation. We encourage you to reference that document for a summary of key metrics and business updates. Before we begin, we remind you that certain statements made by Insulet 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 in operating margins, adjusted EBITDA, and constant currency revenue, which is revenue growth excluding the effects 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. With our strong Q4 2023 results, we capped off another transformational year in which we firmly established Insulet as the market leader in automated insulin delivery. In 2023, we realized a 30% revenue growth, which marked our eighth consecutive year of 20 plus percent revenue growth and represented dollar growth of almost $400 million. We accomplished this while also significantly expanding margins and generating positive free cash flow. Our record new customer starts in 2023 fueled our global growth, and our Omnipod 5 AID system, which generated $1 billion in revenue in 2023, is transforming diabetes management. We entered 2024 with significant momentum, and we are looking forward to a year of many growth catalysts ahead. On today's call, I want to do three things. First, discuss our financial results and market traction. Next, I'll provide an update on the continuing progress of our clinical efforts, and then review key developments in our innovation pipeline. Our fourth quarter revenue once again exceeded our expectations with total Omnipod growth of 35%, including U.S. growth of 43%. Part of our outperformance was driven by U.S. distributors placing additional orders near the end of the quarter, which we had not factored into our guidance. We'll provide more detail on this in a few minutes. Yet even without these additional orders, we closed out 2023 ahead of our expectations, including healthy margin expansion. These are remarkable results, and I want to thank our global team for their execution and dedication. We are proud of the incredible impact the Omnipod product platform is having on people with diabetes. We recently achieved milestones of roughly 425,000 active global customers on the Omnipod platform, which represents growth of approximately 25% from this time last year. This also includes almost 250,000 customers on Omnipod 5, which has proven to be revolutionary. And Omnipod Dash continues to drive strong new customer starts in our U.S. type 2 diabetes market, as well as in most of our international markets. We are thrilled that our unique technology is making a meaningful impact in the diabetes community, advancing our mission to improve the lives of people with diabetes around the world. Omnipod 5 is the only FDA cleared, fully disposable pod-based AID system. This makes our product unique, and clearly differentiated from competitors' offers. These product attributes underpin our competitive advantages and are key to fueling our growth, further establishing our leadership position and expertise in the diabetes market. The fully on-body, wearable AIB experience of Omnipod 5 dramatically reduces the daily burden of living with diabetes. And its simplicity, ease of use, and broad and affordable access are also key drivers of its rapid adoption. For almost a decade, we have significantly invested in U.S. pharmacy channel access, including building the infrastructure, developing key pharmacy relationships, creating an easy onboarding pathway, and building deep in-house expertise, all of which has resulted in the strong and leading channel access we have today. We continue to strengthen Omnipod's access and affordability, including our innovation pipeline that will go through this channel by building on our advantages. In the U.S., Omnipod 5 continued to represent the vast majority of our new customer starts in Q4, and we expect this trend to continue. In addition, customer retention remains strong. The mix of U.S. new customer starts coming from multiple daily injections and legacy tube pumps continued at an estimated 80-20 percentage split. Today, even with improved technology, most people using insulin still use MBI as their mode of care. More than 60% of people with type 1 diabetes in the U.S. are on MDI, and the vast majority of people with type 2 diabetes are using daily injections. Therefore, bringing people out of MDI and onto Omnipod remains the largest opportunity for us, and we continue to drive pump penetration and share gain in both the type 1 and type 2 markets, strengthening our leadership positions. Omnipod 5 not only drove our number one position for U.S. new customer starts in 2023, it was the most prescribed AID system in the U.S. This is because a growing number of healthcare providers are writing scripts for it. In Q4, we saw another increase in prescribers growing to over 18,500, up from 17,000 in Q3. We speak with many HCPs, and it is clear that Omnipod 5 is the winning choice for AID. It is extremely gratifying to see the growing demand, confidence, and adoption, which have led to a growing number of scripts, HCPs, now right for our system. Our strong new customer starts included continuing adoption of Omnipod in the U.S. type 2 diabetes market. We estimate that no more than 5% of people with type 2 diabetes who need intensive insulin therapy are currently using any kind of pump. And we know that we are already the market leader in that space. We are confident that Omnipod will prove to be a simple and compelling solution for the millions of people globally with type 2 diabetes who today need insulin therapy as a part of their diabetes care regimen, as well as the future millions who will naturally progress to requiring insulin as a part of their care. We are well positioned to bring all of the benefits of the Omnipod platform to people with type 2 diabetes both today and in the future. In the fourth quarter, Type 2 diabetes patients represented between 20 and 25% of our US and customer starts across our Omnipod suite of products. While Omnipod Dash with its Type 2 indication for use is the leading insulin clump offering in this market, we look forward to marketing Omnipod 5 to Type 2 patients once we have an expanded indication. The underlying demand is apparent. We expect the last participant to complete our Type 2 pivotal trial in the coming weeks and we plan to submit results to the FDA by the end of 2024 for an expanded indication. We are confident this will be another catalyst that will fuel our growth trajectory, allow us to serve more patients, and help us deliver on our mission. We look forward to sharing study results at ADA this June. The success of Omnipod 5, including its early yet powerful impact in two of our European markets, led to another strong quarter of new customer starts globally. Internationally, we realize the notable sequential increase in new customer starts driven by the impact Omnipod 5 is having in the UK and Germany. Our early success in these countries supports our confidence that it will continue to transform diabetes care and position us as a market leader everywhere Omnipod 5 is available. We remain on track with our Omnipod 5 plus G6 European launch plans, with the aim of making Omnipod 5 accessible to the majority of our European customers by the end of 2024. We are also thrilled to begin our journey launching Omnipod 5 integrated with Abbott's Freestyle Libre 2 Plus sensor. I'll speak to this new opportunity in a moment. In addition to our Type 2 Pivotal Study progress, we are meaningfully advancing several other clinical initiatives. We are excited to attend the ATTV International Conference in Italy in a couple of weeks where we will present data for the Omnipod 5 plus G6 randomized controlled trial. This RCT compared Omnipod 5 to non-AID pump and included study sites in the U.S. and France. We are thrilled to have recently published in the Diabetes Technology and Therapeutics Journal real-world evidence from almost 70,000 people with type 1 diabetes, demonstrating Omnipod 5's effectiveness in a large, diverse population. The data are impressive and demonstrate the strength of the Omnipod 5 algorithm in the real world, delivering leading time and range and very low hypoglycemia, reinforcing Omnipod 5 as the obvious choice for clinical outcomes and personalized diabetes care. Central to everything we do is our mission to simplify life for people with diabetes. We want to make it easier for people to get prescribed therapy, get set up on therapy, and use therapy consistently over time. This is the point of our evolution feasibility study taking place in New Zealand. Our intent is to have a next generation algorithm that will further drive simplicity of use. We completed the first feasibility study in participants with either type 1 or type 2 diabetes commencing initially in supervised hotel setting and then progressing to at-home use. We are pleased with the preliminary results and are analyzing the data and making modifications for the next round of subjects. We will present early feasibility results at ATTD. Lastly, we continue to actively enroll participants in our RADIANT study in France, the UK, and Belgium, which is our Libre 2 integration trial. We began enrollment in September 2023, which is now halfway complete. Feedback has been tremendous, and physicians new to Omnipod 5 appreciate its simplicity and potential to reach many more pump-naive users. As a reminder, both our G6 and Libre 2 studies are designed to provide the evidence we need to elevate Omnipod 5 status as superior first-line therapy and help drive our pricing and market access initiatives as we further roll out Omnipod 5 with multiple sensors across our international markets. I'll now provide an update on our innovation progress, and we'll focus on three key areas, expanding the Omnipod 5 platform, moving upstream in the Type 2 market with Omnipod Go, and building our digital and data capabilities. Many of you have heard us say that our current Omnipod 5 system is our, quote, minimum viable product. That's easy to forget given how quickly the market has adopted OmniPod 5 and made it the leading offer. Our current version is on only one operating system, Android. It is integrated with only one continuous glucose monitoring partner, Dexcom, and until recently was commercialized with only G6. And it contains our first generation algorithm. This is about to change with platform extensions that will strengthen our leadership, deepen our competitive moats, and allow us to open up OmniPod 5 to many more customers. To start, we are excited to have commenced our U.S. limited market release of Omnipod 5 with G7 over the last two weeks. This initial release will allow us time to test the market and build product at scale to prepare for what we are confident will be a very successful full market release of G7 this year. We anticipate an acceleration in new customers starts following a full launch, which will help to fuel our revenue growth more meaningfully in 2025 and beyond. We are also on track with our planned limited market release of Omnipod 5 with Libre 2 Plus in the first half of this year in the Netherlands and UK, made possible by the CE mark approval we received earlier this month. We are excited that the option for customers to use Omnipod 5 with both G6 and Libre 2 Plus will enable us to reach many more patients. Our recent and upcoming CGM integrations are important milestones in providing choice to tens of thousands of customers who want to use Omnipod 5. And we believe both integrations will be significant catalysts for our growth in 2024 and beyond. Rounding out near-term innovation, we are planning for our US launch of Omnipod 5 with the G6 system with our iOS app this year. This will mark a major innovation milestone because so many of our US customers use Apple iPhone and prefer to carry only one phone. Another innovation that will allow us to reach more people and further expand our total addressable market is OmniPug Go, a solution designed for individuals with type 2 who naturally progress to requiring basal-only insulin and want a simple way to receive their daily dose while avoiding the burden of injections. Our commercial pilot is underway, and it will help us refine our commercialization plans. Omnipod Dash has already made insulin the leader in insulin delivery for people with type 2 diabetes, and with Omnipod Go, we are well positioned to move upstream in the patient care pathway. When we achieve clearance for Omnipod 5 in the type 2 market, we will bring all of the advantages of our AID system to this market. With these three products, our aim is to deliver an Omnipod portfolio that meets the full range of needs of people with type 2 who require insulin as a part of their care. We are excited about our innovation in this space and our ability to address the unmet needs that exist in this patient population. It is a massive global market that we expect will continue to grow, and we have the clear lead to pursue this market opportunity. We are also excited to build on our digital and data capabilities. One of the breakthrough features of Omnipod 5 is the real-time data provided by SIM cards in every controller. We constantly hear from physicians and patients how much they appreciate not needing to plug in for real-time usage data, and 100% cloud connectivity has already given us the opportunity to publish the largest real-world data set on AID. Over time, we plan to use the data to speed up product development, further improve the user experience, streamline physician workflows, and build on our competitive advantages. We also continue building digital and data-driven products to simplify diabetes management for both customers and caregivers. In closing, Insulet continues to set the standard for the industry. With a strong 2023 behind us, we see multiple catalysts in the coming year and beyond. We are confident we will drive significant growth and continued success. I want to thank our Insulet global team for your dedication and deep passion for our customers. and your commitment to delivering innovation. You are the reason for our success and our ability to continue to drive our mission to simplify life for the millions of people with diabetes around the world. With that, I will turn the call over to Lauren.