Insulet Corporation

and instructions will follow at that time. If anyone should acquire 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, June Lazaroff, Senior Director, Investor Relations. Please go ahead. Good afternoon, and thank you for joining us for Insulate's fourth quarter and full year 2024 earnings call. With me today are Jim Hollingshead, President and Chief Executive Officer, and Audemaria Chadwick, Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our fourth quarter and full year results, as well as our 2025 guidance, are available on the investor relations section of our website. Also on our website is our supplemental earnings presentation. Before we begin, we remind you that certain statements made 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 will also discuss non-GAAP financial measures with respect to our performance, including constant currency revenue, which is revenue growth excluding the effect of foreign exchange, adjusted EBITDA, non-GAAP effective tax rate, and free cash flow. These measures align with the supplemental measures that management uses 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 will turn the call over to Jim.

Thank you, June. Good afternoon, and thank you for joining us. We concluded an incredible year with a very strong fourth quarter, achieving several milestones across the business, as well as every one of our growth and margin objectives. We continue to see robust demand and momentum for OmniPod 5, now available to both type 1 and type 2 patients in the U.S., and continue to expand rapidly in international markets. 2024 marked our ninth consecutive year of 20% or more constant currency revenue growth, and we generated over $2 billion in revenue for the first time in Insulet's history. For context, we first achieved $1 billion in full-year revenue in 2021. In just three years, we have doubled our top line. We also delivered on our plan to grow both U.S. and international new customer starts sequentially and year over year in the fourth quarter. This resulted in year over year new customer start growth for the second half of the year in both U.S. and international markets. We also grew new customer starts in both Type 1 and Type 2 populations in the U.S. And I am pleased to share that we have an estimated 500,000 global customers using Omnipod. and of these, 365,000 are active global Omnipod 5 users. Reaching a half a million customers is a tremendous milestone that our entire team is proud to have achieved and elevates us to a stronger position for future growth and value creation, giving our recurring revenue model, which is supported by high customer retention and continuing new customer growth. Our ongoing achievements are proof of the overwhelming acceptance and widespread adoption of Omnipod 5. and have positioned us with strong momentum as we enter 2025 and look out over the longer-term horizon. We have great confidence in our objectives to continue growing and executing our strategic plans across our U.S. and international markets. Anna will take you through what this means in terms of our financial outlook. But first, I will highlight our initiatives and progress made across our three strategic focus areas. First, our work to advance the OmniPod 5 platform through our cascade of innovation fueled by data. Second, our strategy to lead ongoing growth for both Type 1 and Type 2 in the U.S. And third, our commitment to drive access to OmniPod 5 internationally. Starting with our cascade of innovation, which includes our broad compatibility with smartphones and sensors. The work to develop and establish these compatibilities from our platform has allowed us to strengthen and expand our market-leading position with Omnipod 5 and will continue to be a driver looking forward. In October, we launched the Omnipod 5 iOS app in the U.S., integrated with G6, and we have heard from many new users that iOS was one of the key factors in choosing Omnipod 5. Our iOS app offers enhanced capabilities that are unique and time-savers for potters, including our custom foods feature, which makes mealtimes simpler. Feedback has remained extremely positive, including phrases like life-changing, freedom, and normalcy. Since launching iOS, over 25% of U.S. OmniPod 5 users have switched to using their iPhone, and we remain on track to launch iOS with G7 in the first half of this year. In November, we are proud to have launched Omnipod 5 integrated with Abbott's Freestyle Libre 2 Plus sensor in the US. We also continue to ramp Omnipod 5 with Dexcom's G7 in retail pharmacy. In the fourth quarter, over 90% of US customers and over 30% of our international customers were using Omnipod 5. These are significant achievements given that we fully launched Omnipod 5 in the US in mid 2022, and had only launched in four international markets as of the end of 2024. We are proud to have delivered terrific customer-centric innovation, which has helped us meet customers where they are and bring them onto our technology. In 2024, we saw more Omnicod 5 technology integrations and launches than in the prior three years combined. It is no coincidence that our revenue essentially doubled in that same period. Omnipod 5 is the most connected tubeless automated insulin delivery or AID system on the market. Today, I am also excited to announce our next leap forward in diabetes management with the U.S. limited market release of Omnipod Discover, a new value-added service for HCPs and patients to track data, identify utilization and health trends, and discuss these dynamics together. Omnipod Discover is a digital platform connecting clinicians and their patients for personalized data management, insulin usage insights, and learning materials to optimize patient engagement and outcomes. The Omnipod Discover platform will be integrated and accessible across devices from a clinician's workstation or a patient's smartphone. We look forward to sharing user experience updates as we roll this out over the coming months and quarters. In clinical trials, Last week, our secure T2D manuscript was published. These findings support our indication for Omnipod 5 use in adults with type 2 diabetes and will be leveraged to transform the lives of millions of people. Additionally, results from our RADIAN study will be shared at the Advanced Technology and Treatments for Diabetes Conference in Amsterdam next month. Our STRIVE study, which will test further enhancements to our world-class SmartAdjust algorithm, will also commence enrollment next month. And our investment in fully closed-loop algorithm research continues with our evolution studies, with the next phase commencing later this year. These trials are further evidence of our commitment to continue to advance our technology platforms, which we validate through clinical evidence. Turning to our second strategic focus area, leading ongoing growth in the U.S. for Type 1 and Type 2. We have long offered the best technology on the market for Type 1 and are incredibly excited to continue expanding into Type 2. In the fourth quarter, consistent with the prior quarters, over 85% of our U.S. new customer starts were from people previously on MDI. This is a tremendous testament to the value and simplicity we bring to people living with diabetes. Since we received FDA clearance for Type 2 ladle expansion for Omnipod 5 in August, We have been working relentlessly to build our market leadership position in the type 2 diabetes market. As a reminder, we are the first to market in AID for the type 2 indication. It's a very important opportunity for us and for millions of patients living with type 2 diabetes who need insulin. For the fourth quarter, type 2 users represented over 30% of our U.S. new customer starts as we ramped adoption in this patient population. In the U.S., our Type 2 indication has significantly expanded the total addressable market for insulin by making Omnipot 5 commercially available to over 5.5 million people who live with insulin-requiring Type 2 diabetes. This market includes 2.5 million people who are insulin-intensive and on MDI. We estimate that this market is less than 5% penetrated, with the majority of current pump users using Omnipod. The other portion of the market includes approximately 3 million people that use insulin on a basal-only therapy every day, and that market is barely penetrated. This creates a tremendous long runway of opportunity, and we are leveraging our proven commercialization playbook to drive reach and awareness. To expand our reach, we are growing our US sales force to engage more patients and prescribers. As we discussed last quarter, This expansion involves adding more feet on the street and is not a wholesale change to our sales organization. We expect this expansion to increase the reach of our direct sales to over 40% of the 2.5 million type 2 insulin-intensive population in 2025. To date, we have filled over three-quarters of our expanded sales roles, and we expect the majority of those roles to be trained by the end of the first quarter. Our team is hard at work to increase the number of U.S. HCPs engaging with Type 2 patients and prescribing Omnipod therapy. We saw an increase of over 20% in HCPs prescribing for Type 2 sequentially in the fourth quarter. As we invested in our sales and marketing efforts through the fourth quarter, we also saw an increase in new DTC leads from individuals with Type 2 diabetes, and we are having great success getting those customers quickly onto Omnipod 5. We are proud and motivated by the progress we made in the fourth quarter, and we remain committed to advancing both Type 1 and Type 2 commercial efforts in the U.S. Turning to our third strategic focus area of international expansion, our international business is also making great progress. We continue to reach more patients in the U.K. and Germany, and we're seeing strong early adoption in France and the Netherlands. This is a testament to the power of Omnipod 5. It wins everywhere it goes. We are accelerating international launches. In January, OmniFi 5 with G6 and Libre 2 Plus became commercially available in five new European countries, Italy, Denmark, Finland, Norway, and Sweden. And we plan to launch in five additional countries over the course of this year. We are also on track to expand our sensor integration, starting with our rollout of G7 with first international launches planned in the UK and Netherlands this quarter, and more markets to follow through the year. providing OmniPOD 5 with more sensor options for people with diabetes. In closing, we had a terrific year, and our achievements are proof that we are continuing to build on our lead. As we advance through 2025, we will remain relentlessly focused on driving the diabetes industry forward with OmniPOD 5. We have brought more patients from MDI to AID technology than all of our competitors combined over the last several years, including in 2024. Our time and investments have paid off with the number of HCPs writing scripts for Omnipod 5 growing to nearly 24,000. We have over two decades of experience and distinct competitive moats. Our form factor is unique and has proven very difficult to replicate. It took us years to build a PaaS Comp product at scale with quality, high yields, safety, and very well protected IP. Our form factor has allowed us to deliver widespread affordable access with pay-as-you-go economics through the pharmacy channel. The majority of our U.S. customers now have a copay of $30 or less a month, which is essentially a dollar a day or less. And given we are the only insulin pump in the diabetes space with Medicare Part D reimbursement, many of our customers pay $0 copay. And with the limited market release of Omnipod Discover, data will continue to be an emerging mode for us. Every OmniPod 5 customer is connected to the cloud, and we are able to use data to improve our algorithms, to improve customer experience, and optimize outcomes. Given these deep moats, which we continue to strengthen, we see ourselves as a category of one. As we celebrate 25 years of Insulet, I want to acknowledge our global team, from operations for getting our new Malaysia site up and running ahead of schedule, to our field and customer service teams serving and supporting our 500,000 customers, our clinical team for their amazing work that supported our Type 2 FDA clearance, and all of Team Insulate for bringing their best selves to work every day and living our mission to improve the lives of people with diabetes. Thank you all for an incredible year. We are more excited than ever about the path ahead. With that in mind, today we are announcing that we will host an investor day at our Acton, Massachusetts headquarters on June 5th. We will provide further details in the upcoming weeks and months, and we hope many of you can join us. With that, I will turn the call over to Anna to walk you through our results and guidance.

Thank you, Jim, and good afternoon, everyone. We are pleased to conclude a very strong year, financially, clinically, and operationally. Looking ahead to 2025, we are optimistic for another exciting year. For the full year of 2024, we delivered revenue of $2.1 billion, which represented growth of 22% over prior year and marked the ninth consecutive year of 20% or more constant currency revenue growth for Insulet. The revenue growth was comprised of U.S. Omnipod growth of 21% An international Omnipod constant currency growth of 27%. Gross margin was an impressive 69.8% and operating margin was 14.9%. For the full year, our estimated global utilization and retention trends remain stable versus prior year. Our results demonstrate the ongoing strength of our platform and the dedication of our teams. who executed our vision of getting more patients on Omnipod in every geography we serve, culminating in tremendous recent milestones of 500,000 active global customers. In our fourth quarter, we achieved 17% total revenue growth and our highest quarter of total revenue dollars. We delivered on our plan to grow both U.S. and international new customers start sequentially and over prior year, resulting in year-over-year growth in new customer starts for the second half of the year. We also grew new customer starts sequentially and year-over-year in both Type 1 and Type 2 markets in the U.S. Let me now provide more details on the fourth quarter results. U.S. Omnipod revenue grew 12.4%, just above the high end of our guidance range. driven by ongoing strong demand for Omnipod 5. As a reminder, the fourth quarter of 2023 included two stocking dynamics, which total an estimated $30 to $40 million, and impacted our fourth quarter of 2024 growth rate by approximately 1,100 basis points. U.S. revenue growth was driven primarily by increasing volume as we continue expanding our customer base. As Jim discussed, we are extending the Omnipod 5 platform through our cascade of innovations, which will support continued customer growth. Additionally, the ramp in Type 2 new customer starts that we experienced after the FDA clearance in August continued throughout the fourth quarter. We expect the Type 2 label expansion to contribute meaningfully to revenue in 2025, and it presents a significant long-term growth opportunity for our business given our annuity-based model. Turning to international markets, our team delivered another exceptional quarter, achieving 33.1% revenue growth, which was at the high end of our guidance. Growth was driven by continued strong demand and adoption of Omnipod 5. On a reported basis, Foreign currency was a 40 basis point tailwind over the prior year, which was approximately 60 basis points unfavorable versus our guide. We continue to drive strong Omnipod 5 growth in the UK and Germany. We're also pleased with the early momentum we're seeing in Omnipod 5 adoption across France and the Netherlands, along with positive feedback from our recent Libra 2 Plus integrations. With our recent launches of Omnipod 5 in Italy and the Nordics and future market launches planned, international will play an increasingly pivotal role in our growth strategy. Turning to drug delivery, revenue grew 34.1% and was above our guidance range due to an increase in orders from our partners. In addition to our strong revenue growth for the fourth quarter, we are pleased to deliver exceptional growth margin expansion. Fourth quarter growth margin was 72.1%, up 120 basis points over prior year, primarily driven by U.S. volume through the pharmacy channel, Omnipod 5 pricing in international markets, and improved manufacturing efficiencies. We continue to drive margin expansion as we scale and execute our initiatives to drive operational excellence across our global business. Operating expenses increased in line with our expectations as we invested in our business to support our strong growth trajectory, including gearing up for near-term launches globally. We once again grew R&D dollars as we continue to fund our pipeline of innovation. Operating margin was 18.3% and adjusted EBITDA margin was 25.3%. While down from prior year due to the benefits of the stocking dynamics last year, we are very pleased with this strong margin result. From a tax perspective, in the fourth quarter, we released approximately $17 million of our valuation allowance, resulting in a non-cash tax benefit, which has been adjusted out for non-GAAP purposes. Our non-GAAP effective tax rate for the fourth quarter was 25%, and the full year was 24%. Turning to cash and liquidity. We ended the year with over $950 million in cash and cash equivalents and the full $300 million available under our credit facility. Our free cash flow for the year was $305 million, a milestone that represents our commitment to and execution on delivering a premium financial profile as we continue generating cash and investing in the business for long-term profitable growth. Now turning to our 2025 outlook. For the full year, we expect total Omnipod revenue growth of 17 to 21% and total company revenue growth of 16 to 20%. As a reminder, our revenue growth guidance is on a constant currency basis. For US Omnipod, we expect revenue growth of 16 to 20%. driven by strong Omnipod 5 adoption as we continue to build our recurring revenue model by growing Type 1 and ramping Type 2. We also expect benefits from G7, Libre 2 Plus, and iOS as customers continue to move from MDI to our AID technology. We anticipate U.S. new customer starts will grow on a year-over-year basis. Our guidance for U.S. revenue assumes similar trends in pricing, utilization, and retention for 2025 relative to 2024. For international Omnipod, we expect revenue growth of 22 to 26%. On a reported basis, we are assuming an unfavorable foreign currency impact of approximately 300 basis points. We expect continued growth in the UK and Germany as those markets benefit from new integrations and customers continuing to upgrade from Omnipod Dash to Omnipod 5. We also expect France and the Netherlands to continue to ramp and contribute more meaningfully to our growth in 2025. And we expect the recent country launches in Italy and the Nordics to also ramp throughout the year. We anticipate international new customer starts will also grow year over year. Volume is expected to be the primary driver of our international revenue growth. Consistent with trends we saw in 2024, we expect international revenue to also benefit from pricing as new customers adopt our technology and existing customers upgrade from Omnipod Dash to Omnipod 5. Our international guidance assumes a modest benefit from pricing and stable utilization and retention trends from 2025 relative to 2024. Lastly, for drug delivery, we expect a 45 to 55% decline. Turning to 2025 gross margin. As we previously communicated, we expect modest improvement going forward as compared to prior years, which reflected the benefit of pricing as we shifted to the pharmacy channel. For the full year, we expect gross margin of approximately 70.5%. This guidance reflects the continued build in scale and manufacturing efficiencies, including our Malaysia facility becoming slightly accretive in the back half of the year. We expect these benefits to gross margin to be partially offset by the ramp of our lower margin international business. Additionally, our gross margin guidance assumes that our business will not be materially impacted by tariffs. We are very pleased to have a robust manufacturing position here in the U.S. complemented by manufacturing sites in China and Malaysia. Our supply chain strategy includes developing regionally located dual source for materials, which provides us with resiliency. This strategy has demonstrated success over prior challenging supply chain environments and offers us great optionality and adaptability in the current environment. Naturally, this is something that we are continuously monitoring. For the year, we're guiding operating margin of approximately 16.5%, which reflects 160 basis points of expansion over 2024. We expect to continue to expand margins while further investing in R&D, which we will continue to fund with more dollars on a year-over-year basis given our exciting pipeline of innovation. Our operating margin guidance also includes investments in sales and marketing, particularly as we develop the Type 2 market and continue to grow our Type 1 customer base. We have many catalysts for growth in 2025 and considerable opportunities to drive further margin expansion over the near and long term. Coming from scaling the business efficiently, even with continued investments in our robust innovation pipeline and commercial efforts. Consistent with historical patterns, we expect growth margin and operating margin to be lower in the first half of the year and improve in the second half. For 2025, we expect our effective tax rate to be 20 to 25%. We expect capital expenditures to be slightly higher in 2025 compared with 2024 as we continue to expand and optimize our manufacturing and supply chain operations as well as support our global expansion. Additionally, we expect to continue generating positive free cash flow annually and strengthening the cash position on our balance sheet through organic growth and profitability. Turning to our first quarter 2025 guidance, we expect total company revenue growth of 22 to 25%. For U.S. Omnipod, we expect growth of 21 to 24%. As a reminder, the first quarter of prior year included 20 to 25 million of unfavorable stocking dynamics. Adjusting for this, our first quarter U.S. Omnipod growth is in the mid to high teens. For international Omnipod, we expect growth of 28 to 31%. On a reported basis, we estimate an unfavorable foreign exchange impact of approximately 400 basis points. And we expect drop delivery revenue to decline 5 to 10%. In conclusion, we are very pleased with our recent progress and immensely excited for the year ahead. Underpinned by our innovative technology, significant investments in growth and product differentiation, wide competitive modes and unparalleled feedback from providers and patients, we are positioned to continue leading the insulin delivery field and changing the lives of people with diabetes for the better. Furthermore, we will do all of this while generating strong growth executing on our plans for growth margin and operating margin expansion, and improving our profitability and free cash flow profile to enable continued investments in key growth catalysts. To summarize, we are optimistic about the future and the long-term value we are creating. I look forward to sharing even more of these topics during our investor day in June. With that, operator, we will open the line for questions.