Insulet Corporation

Good afternoon, ladies and gentlemen, and welcome to the Insulate Corporation first quarter 2024 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 Insulate's first quarter 2024 earnings call. With me today are Jim Hollingshead, President and Chief Executive Officer, and Ana Maria Chadwick, Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our first quarter results and 2024 guidance will be available on the investor relations section of our website. Also on our website is our 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 effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance from period to period. and we believe they are helpful for others as well. 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. Coming out of a 2023 that saw Insulet emerge as the clear industry leader, We entered 2024 with significant momentum. We are off to a great start in Q1, fueled by continuing strong demand for Omnipod 5. Our global insulate team continues to execute at a high level, bolstering our confidence in another year of robust revenue growth and margin expansion. Our first quarter revenue results exceeded our expectations for every product line. Given those results and the cascade of innovations that we plan to deliver this year, we have increased our guidance for both top line and operating margin growth. On today's call, I want to do three things. Provide a high-level review of our Q1 results and the continuing strength of our competitive position in the market, give an update on our broad innovation agenda for 2024, including our efforts to expand the Omnipod 5 platform and our progress in the Type 2 market, and discuss our ongoing efforts to capture the value of scale across our business. Starting with financial performance, our first quarter revenue and margins exceeded our expectations. We achieved total Omnipod revenue growth of 21%, including U.S. growth of 23%, and international growth of 15%. In the U.S., we continued to build on our clear leadership in the market, and our Omnipod 5 automated insulin delivery system was number one in new customer starts by a wide margin. Demand for Omnipod 5 remains very high, and U.S. new customer starts were robust and in line with our expectations. OmniPot 5 is designed to expand the market through its ease of use and easy access, and we continue to succeed in driving market growth. During the quarter, roughly 85% of our new starts came from people previously using multiple daily injections, our target market, and our competitive conversions remained very strong. The Omnipod platform also remains the top choice for people with either type 1 or type 2 diabetes. Type 2 patients represented roughly 25% of our new starts in the quarter. Omnipod 5 continues to be the game-changing offer we thought it would be when we first brought it to market. This is true in the U.S. and also internationally, where it is dramatically accelerating our growth. Last year's successful launches in the UK and Germany continue to exceed our expectations as our teams generate strong new customer starts. In fact, in Q1, more than half of our total international new customer starts were Omnipod 5. Given Omnipod 5's early contribution in our European markets, we are raising our international revenue outlook by 500 basis points to a range of 12% to 15%. As a result, we now expect total Omnipod growth of 19% at the high end and 18% for total company, representing a milestone of $2 billion in total company revenue. Anna will provide more details on our increased guidance in a few moments. Our global results in Q1 make one thing very clear. Omnipod 5 is without a doubt highly differentiated and the best offer on the market. Its ease of use, pay-as-you-go economics, affordability, and widespread access make it the obvious choice for insulin delivery for people with type 1 diabetes and soon for people with type 2 diabetes once we achieve label expansion. Omnipod 5 leads the market everywhere it goes, and we are not stopping there. During Q1, we made significant strides across our innovation portfolio. Because Omnipod 5 is the market leader, it's easy to forget that the current version remains our initial minimum viable product. In 2024, we will expand on the Omnipod 5 platform by bringing new sensor integrations, launching the system in new geographies, and extending our phone control offering. In the US during Q1, we entered limited market release of our integration with Dexcom's G7 and are on track for full market release this summer. which will allow us to expand choice for customers and capture the opportunity created by the growth and adoption of Dexcom's latest sensor. In Europe, we successfully entered limited market release of our integration with Abbott's Freestyle Libre 2 Plus sensor in both the UK and the Netherlands, ahead of our mid-year launch plans. This release represents two firsts. Omnipod 5 is the first AID system to offer integration with the Libre 2 sensor in Europe, which is Abbott's most widely adopted CGM. And Omnipod 5 in the Netherlands represents our first sensor of choice pod offering. These pods are compatible with both Abbott's Libre 2 Plus and Dexcom's G6 sensor. Early results from the UK and the Netherlands are extremely promising. and we look forward to providing future updates with regard to the timing of full market release. Staying in Europe, we are pleased to announce that we now plan to launch Omnipod 5 with G6 in France, also this summer. France has historically been one of our largest markets, and one in which we know demand for our solutions is high. When we first launched Omnipod Dash in this market, it quickly became the insulin pump brand of choice, and we are confident in our ability to drive strong adoption with our advanced AID system. With the launch in France, we will achieve our stated goal of making Omnipod 5 accessible to the majority of our European customers and reach this milestone ahead of our internal end-of-year expectations. We anticipate our recent Omnipod 5 international launches will fuel accelerated new customer starts in the second half of this year and revenue growth next year and beyond. We also plan to enter our U.S. limited market release for our iOS app this summer. Extending Omnipod 5 onto the iPhone platform is one of our most frequently requested features, and we are excited to bring this offer to market. Turning to the opportunity in type 2 diabetes, where we remain the U.S. market leader in this large and underserved patient population. The commercial pilot with Omnicod Go, our FDA-cleared offering for the over 3 million people in the U.S. who need daily, basal-only insulin, continues to offer significant learnings. Because of our pilot efforts, we have developed a better understanding of this market, and we have expanded the definition of targeted patient segments. We now also have even greater confidence that we will be able to bring our innovative technology to a broader range of HCP and physician practices. We are refining our plans for extended commercial reach based on those learnings. We also know that there is significant current demand for solutions that support intensive insulin use for people with type 2 diabetes. In this market, Omnipod Dash continues to perform extremely well, driven by its ease of use and accessibility. In that context, we are very excited about the progress we are making towards achieving FDA clearance for Omnipod 5 for type 2. During Q1, we reached a key milestone in our secure T2D pivotal trial, with the last patient completing the protocol. We are well on track to meet our goal of submitting to the FDA for label expansion by the end of the year. Once cleared, we expect to meaningfully accelerate Omnipod 5 adoption among the approximate 2.5 million people with insulin-intensive type 2 diabetes. And we will have the broadest offering of insulin delivery technology solutions on the market for this important patient population. Lastly, we continue to analyze the market impact of GLP-1 use. Analysis of actual claims data demonstrates that GLP-1 use accelerates the adoption of insulin among people living with type 2 diabetes. The data are definitive and striking and strengthen our conviction in the size of the unmet need and the size of the business opportunity for our growing type 2 portfolio. We are finalizing our analysis and look forward to providing a more detailed update soon. 2024 is shaping up as we planned to be a year filled with a cascade of innovations that will allow us to build on our position of market leadership. And we will take advantage of those innovations because of our expanding scale. Our business continues to enjoy several advantages that we've achieved through commercial scope and operational scale. First, Our products have very broad reimbursement, with more than 95% of covered lives in the U.S. for both Omnipod 5 and Omnipod Dash. And through our nationwide distribution reach, Omnipod is available at retail pharmacies that are within five miles of over 85% of the U.S. population. Our strategy to increase awareness of Omnipod with endocrinologists and primary care physicians has resulted in an expanded base of healthcare providers writing scripts for our products. fueling our leadership position. In the U.S. in Q1, the number of U.S. Omnipod 5 prescribing HCPs grew to over 20,000, up from over 18,500 the prior quarter. These prescribers were endocrinologists, PCPs, and other HCPs, and the split was approximately a third each. And the prescribers spanned both the Type 1 and Type 2 markets, and both increased substantially year over year. In order to fuel our growth, we are further expanding our commercial reach. Internationally, we continue to prudently invest in our commercial expansion and in our market access capabilities. In the U.S., we are in the process of incrementally expanding our sales force, including the creation of new territories and expansion into targeted pediatric centers. Our broad sales, marketing, and channel capabilities allow us to reach a large and growing population of patients. and represent a growing set of advantages over aspiring competitors. Lastly, we also enjoy significant financial benefits from our scaled manufacturing. Insulet has been on a 20-year journey of capability building and continuous improvement, which has allowed us to build world-class capabilities that drive ongoing quality and productivity. Manufacturing scale and scope have been big drivers of our gross margin expansion over that time, and we expect our new Malaysia facility will fuel continued efficiency gains. We are in the final stages of validating our manufacturing lines in Malaysia and expect to begin producing saleable product in Q3. The facility represents a sizable investment of approximately $200 million over the course of four years through 2026, provides approximately 400,000 square feet of manufacturing space, and is expected to house more than 1,000 full-time employees at full capacity. Our regional sourcing strategy includes using local suppliers for components, contributing to resiliency and improved costs. This facility will also strengthen our global operational capabilities, drive increased capacity to meet our robust demand, and support future international market expansion. We expect our Malaysia site to be accretive to gross margin in its first full year of production, ramping over time. It represents one of the many opportunities we have to lower total landed product costs and expand margins over the near and long term. Our advantages in scope and scale put Insulate in a strong position to continue to invest in the growth of our business and to expand our margins. This is yet another way in which our business is unique among our direct competitors. With that, I'll introduce Anna, who is joining us for her first call as our CFO. As you will have seen in our announcement, Anna is a highly accomplished and proven leader. We are thrilled to have her join the Insulet team, and I'm personally looking forward to benefiting from her partnership as we execute our strategy to drive rapid growth and strengthen our financial profile. Over to you, Anna.