Insulet Corporation

require assistance during the conference, please press star then zero on your touchstone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, June Lazeroff, Senior Director Investor Relations.

Good morning and thank you for joining Intiliff's second quarter 2025 earnings call. With me today are Ashley McEvoy, President and Chief Executive Officer and Ana Maria Chadwick, Chief Financial Officer. Also joining us for the Q&A portion of today's call is Eric Benjamin, Chief Product and Customer Experience Officer. Both the replay of this call and the press release with our quarterly results and guidance will be available on the Investor Relations section of our website. We also included supplemental information which can be found within Intiliff's corporate presentation on our website. Before we begin, we remind you that certain statements made by Intiliff 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 current limitations of such statements. We will also discuss non-GAAP financial measures with respect to our performance, including adjusted operating income, adjusted EBITDA, adjusted tax rate, 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 -over-year reported basis with the exception of revenue growth rates, which will be on a -over-year constant currency basis. With that, I will turn the call over to Ashley.

Ashley Storrs-Klein Thanks, June, and good morning, everyone. As of yesterday, I have 100 days under my belt. I visited our top four markets and all three shifts in our active manufacturing operation. I've met with physicians in the field and at the ADA. I've listened to our team, partners, healthcare providers, investors, analysts, and most importantly, our loyal potters. The welcome by Team Insulet and the diabetes community has been warm and gratifying, and I'm eager to share insights and insights from this quarter. First and foremost, our results this quarter reflect our attractive position as a differentiated, durable growth company in a large, under-penetrated market. We grew 31% surpassing the $600 million mark for the first time with $649 million of revenue and continue to be highly profitable and cash flow positive. We achieved this by getting a record number of people on POD. We drove both -over-year and sequential growth in new customer starts across all of our strategic growth areas, US Type 1, US Type 2, and international. This reflects Omnipot 5's unique consumer appeal and strong clinical outcomes, as well as solid prescriber growth and commercial execution. We delivered this growth while generating strong adjusted operating margin expansion for the quarter. Based on these robust results, we are raising full year guidance for revenue growth and adjusted operating margin, which Anna will walk you through. For now, let me turn to some observations from my first 100 days. First, I've been incredibly impressed by the passion and commitment of our Insulet team and how that energy has been channeled into the product and into the community. Everyone here cares deeply about revolutionizing diabetes management, and that intense focus has earned Insulet a unique and advantaged position at the nexus of consumer health, med tech, and health tech. Going back to Insulet's origins as a groundbreaking insulin management system for children, the company has innovated to improve clinical outcomes and transform patients' lives. Omnipot created the market for modern insulin delivery and has built an entirely new category. Patients see us as a POD, not a pump. We continue to lead the market with truly differentiated technology. Omnipot 5 is an engineering marvel, a complex medical device that is simple to use and delivers great outcomes. For patients, it's an insulin delivery experience in a class by itself. Omnipot's advantages shine through in clinical evidence. We have a large and growing body of randomized trials and real world evidence underscoring our strong clinical outcomes across type 1 and type 2 diabetes. At the ADA in June, we highlighted Omnipot 5's robust results from security duty, our pivotal trial in type 2 diabetes, including a .8% reduction in A1C and a 20% improvement in time and range. Additionally, it showed that Omnipot 5 patients use 29% less insulin and experienced minimal weight gain and lower hypoglycemia versus other therapies, all key clinical considerations for physicians evaluating type 2 diabetes treatments. Results like these are a key factor driving adoption and the tremendous growth in our prescriber base. Today, more than 25,000 healthcare providers are prescribing Omnipot 5 in the United States. This is up approximately 20% from last year and continues to grow. My conversations with potters and physicians have also reinforced that customer experience and clinical outcomes go hand in hand. The unique simplicity of Omnipot 5 brings people to our platform who saw themselves as too old for advanced technology or who felt ashamed to be using a medical device. Jack, a 91 year old veteran in Baltimore discovered that a pod is easier than injections and now lives with less hypoglycemia. Samantha, a teenager from Tampa, has started to go to sleepovers and wear dresses again. Thanks to the discretion of Omnipot and the ability to control it with her phone. We celebrate this broad impact and continue to invest in making Omnipot even better. Orchestrating a superior end to end experience for potters has required us to devise and invest in thoughtful solutions across our business. Over the past decade, we've invested more than 1 billion manufacturing capabilities. We have pioneered advanced automation in our plants and built a robust and secure global supply chain to deliver tens of millions of complex electromechanical devices per year at medical standards. Insulin's proprietary tooling, equipment and processes enables a sustainable cost advantage. Similarly, for patient access, 8 years ago, insulin began building critical pair relationships and negotiating pharmacy channel distribution in the US to make Omnipot available where patients pick up their insulin. Today, our near 100% pharmacy model and unique Medicare Partee coverage make Omnipot easy to find and easy to afford. You can get an Omnipot at more than 47,000 pharmacies in the United States, often for just a dollar per day. Importantly, we earn our customers' business essentially every three days with our pay as you go model. Our infrastructure is different than that of traditional pumps because Omnipot is different. Together, these advantages have given rise to a community unlike any other I've seen during my 30 years in healthcare. Omnipot has grown into a beloved grassroots brand fueled by potter's word of mouth and advocacy. In the US, Omnipot is the most prescribed and most requested AID system. It is also number one in new customer starts in the US and the EU. Our more than 500,000 potters are passionate and engaged R&D partners with a deep interest in continuously enhancing our products for the benefit of everyone with diabetes. Building off of this grassroots base, we have a tremendous potential to broaden our reach, become an iconic world-class brand, and grow faster with targeted and compelling marketing strategies to reach distinct segments of type one and type two patients. In sum, I'm even more confident than I was 100 days ago in insulin's unique strengths and exciting future. We have a strong brand, engaged customers, differentiated technology backed by clinical outcomes, and a durable recurring revenue business model all operating in a large, unpenetrated market. We have -in-class technology, manufacturing, and patient access that we have used to create a category of one. And we have a rich data ecosystem that is driving a virtuous cycle of smarter products and better outcomes. There is tremendous opportunity ahead. Last quarter, I emphasized that our strategic objectives are intact. That is still the case. As you can see from the results this quarter, we are executing well against these objectives. We continue to expand our lead in US type one, driven primarily by new prescribers and new patients. The seamless expansion of our US sales team has been and will continue to be a key priority as we further strengthen and scale our commercial operations. Our progress on this front has accelerated our momentum in the marketplace and contributed to our strong new customer starts. We are driving adoption as the first mover in US type two. We are in the early stages of creating the market, learning rapidly, and honing our approach. Type two new customer starts accelerated in the quarter. I'm encouraged by the strong conversion from MDI and the positive response from early adopters. Customer satisfaction is high, and we are seeing remarkable outcomes. Endos with type two patients who have been reluctant to give themselves an insulin shot are seeing results with Omnipod 5 that near our secure T2D outcomes, meaningful improvement in A1C, and improved glycemic control. We are growing durably and profitably outside the United States. Our international business posted nearly 40% year over year growth and accounts for approximately 30% of our revenues. Our revenue base is concentrated in the UK, France, and Germany, where we still have room for further penetration. Omnipod 5 launches in these markets have gained strong adoption and driven positive price mix realization. We have an immense opportunity to continue growing at attractive margins. And finally, we are investing in platform innovation as we maintain and expand our technology advantage. This includes our next generation hybrid closed loop algorithm in the STRIVE Pivotal Study and a fully closed loop algorithm designed specifically for type two diabetes and our evolution two and simple use feasibility studies. We are also advancing our integration with the latest sensors, G6, G7, and Libre 2 Plus have launched and Libre 3 Plus is coming in 2026. In June, we were excited to fully launch our iOS app compatible with G7. This integration represents a major milestone in our commitment to providing our customers more choices with less devices. Getting potters to use their phones versus controllers typically yields benefits to engagement, retention, and outcomes. While we have seen rapid adoption of our iOS and Android app, we still have approximately 55% of eligible US potters still predominantly using their controller. We have considerable upside as app use grows and we expand our integration. Looking ahead, my focus now is determining how we build on our strengths and further scale this incredible business for even greater global impact. We are seeking to move faster, deepen our advantages, drive penetration, raise margins, and open new opportunities. I'm still learning, but already see four areas we'll be working on. First, enhancing commercial capabilities. We have earned a place as market leader and can now sell our clinical outcomes and experience advantages as well as our unique form factor. Second, building the power of our brand globally and strengthening our direct to consumer capabilities to accelerate demand generation and market development. This is a key opportunity across all of our markets. Third, driving global scale, both operationally and financially. As market leaders and market shapers, we can strengthen our local market presence outside the US to grow faster and expand our margins. We'll invest in market development capabilities, commercial excellence, and top talent to accelerate market penetration. Finally, we'll accelerate the pace of innovation. We will ensure we are earlier on next generation sensor integration, invest in technology to modernize the customer experience, and improve retention and patient outcomes. We're also pushing our limits and thinking expansively about our strategic ambition and longstanding focus on solving unmet patient and clinical needs. We look forward to sharing more at our upcoming investor day on November 20th in active Massachusetts. Before I close, I would like to thank the insulate team for their hard work and commitment this quarter. This record performance would not be possible without your efforts. I count myself fortunate to have joined this team and this business with our highly differentiated technology platform. We have a unique opportunity to improve lives for millions of people with diabetes to scale profitably in a large and under penetrated market and to drive long term value creation. With that, let me turn the call over to Anna to discuss second quarter results and guidance in more detail.

Thank you, Ashley, and good morning, everyone. We delivered another excellent quarter, growing new customer starts on a year over year and sequential basis in the US for both type one and type two and in international. Consistent with prior quarters, over 85% of our US new customer starts came from MDI and over 30% were type two. In addition, we had the highest quarter of competitive switches since late 2023 revenue for the total company was 649 million and grew 31% over prior year on a reported basis. For currency had a favorable impact of 160 basis point. Our estimated global utilization and analyze global retention rate remains stable. Our team executed across the business, delivered exceptional top line results while also expanding adjusted operating margin and increasing profit. We are proud of this accomplishment and are raising full year revenue guidance, making 2025 our 10th consecutive year of 20% or more growth on a constant currency basis. We are also raising our adjusted operating margin reflective of the operating leverage we are achieving across the business. I will walk through guidance in a few moments. Turning to our second quarter revenue results. US revenue grew .7% above the high end of our guidance range on a strong performance from our commercial team as we continue to see great demand and momentum for Omnipot 5, which is driving growth in our customer base. US Omnipot revenue growth benefited by approximately 350 basis points from a prior year stocking dynamic and an approximate 150 basis points tailwind related to the timing of rebates. As we commented last quarter, this rebate dynamic was a headwind in the first quarter and expect to be neutral on a full year basis. Turning to international, we had another quarter of exceptional execution, achieving revenue growth of .8% above the high end of our guidance on a reported basis. Foreign currency was favorable 620 basis points over the prior year. International growth was primarily driven by continued demand for Omnipot 5 and customer base growth. As expected, positive price mix realization also contributed to growth as customers shift from Omnipot Dash to Omnipot 5. We're seeing strong growth in the UK, Germany and France, in addition to the other countries where we have launched Omnipot 5. We are also continuing to work with local health authorities to expand access and broaden our sensor integration roadmap to drive adoption. Moving down the piano, gross margin was 69.7%. Gross margin included approximately 10 million of inventory related charges, including the write-off of legacy components as we support the strong demand and migration to Omnipot 5, our latest technology. We're pleased to have delivered .7% gross margin on a year to date basis, and we're on track to achieve our full year guidance of approximately 71%. Operating expenses increased as we continue to invest in our pipeline of innovation and sales and marketing efforts, especially as we develop the Type 2 markets. Adjusted operating margin was .8% and adjusted EBITDA margin was .3% in the second quarter. Our team is executing well across our growth objectives and reinvestment plans, which have together generated meaningful operating leverage. Our second quarter non-GAAP adjusted tax rate was 22.1%. Turning to cash and liquidity, we ended the quarter with $1.1 billion in cash and the full $500 million available under our credit facility. We continue to strengthen our balance sheet, improve our financial flexibility, and lower our cost of capital. Today, we have extinguished $420 million of our convertible notes due in 2026, and we have initiated the redemption of the remaining $380 million, which will close later this month. During the quarter, we repurchased 93,000 shares for approximately $30 million under our $125 million authorization and also refinance our term loan fee, reducing the rate by 50 basis points, which lowers our interest extent by approximately $12 million over the remaining term of the loan. Now turning to guidance, we are pleased to provide our outlook for the third quarter. As a reminder, our revenue growth guidance is on a constant currency basis. For the third quarter, we expect total omnibus revenue growth of 24 to 27% and total company growth of 22 to 25%. On a reported basis, we are assuming a favorable impact of 100 basis points from foreign currency. For U.S. Omnipot, we expect third quarter growth of 21 to 24%. For international Omnipot, we expect third quarter growth of 33 to 36%. On a reported basis, we are assuming a favorable impact of 300 basis points from foreign currency. Now turning to our full year 2025 outlook. For the full year, we are raising our total Omnipot revenue growth guidance to a range of 25 to 28%. We are also raising our total company revenue growth guidance to a range of 24 to 27%. On a reported basis, we are assuming favorable impact of 100 basis points from foreign currency for the year. For U.S. Omnipot, we are raising our revenue guidance range to 22 to 25% driven by customer-based growth. We continue to win and lead in Type 1 and gain momentum in Type 2. We expect current demand trends supported by consistent rate of patient conversions from MDI to support our strong growth. We expect -over-year growth in U.S. new customer starts in 2025. As a reminder, our U.S. growth guidance for 2025 reflects similar trends in pricing, utilization, and retention as we saw in 2024. For international Omnipot, we are raising our revenue guidance to 34 to 37%. On a reported basis, we are assuming a favorable impact of 300 basis points from foreign currency. We expect to drive strong growth in the U.K., Germany, and France while also ramping adoption in our newer international markets, all supported by benefits from new sensor integrations and customer upgrades from Omnipot Dash to Omnipot 5. We expect -over-year growth in international new customer starts in 2025. While volume remains the primary driver of our international revenue growth, our guidance also reflects a modest up list from positive price mix realization. We're also assuming stable utilization trends and, as previously communicated, retention trends improving slightly for 2025 relative to 2024. Turning to 2025 gross margin. For the full year, we are reaffirming our gross margin guidance of approximately 71%, which reflects 120 basis points of expansion over prior year and remains the highest in the diabetes technology space. Our full year gross margin guidance now assumes an impact of approximately 20 basis points from tariffs, which is lower than our prior assumption of 50 basis points, given the recent updates and changes in U.S. tariffs. Our strong manufacturing position and efficiencies from scale mitigate and absorb this impact. For the year, based on our strong performance to date and continued operational leverage across the business, we are raising our adjusted operating margin guidance to a range of 17 to 17.5%. Our guidance includes plans to continue investing in R&D, market development, and demand generation. As we have communicated previously, we remain committed to driving at least 100 basis points of adjusted operating margin expansion annually. As demonstrated by our updated guidance, we will deliver well above this level in 2025. Looking at a few items below our operating income. Consistent with what we have communicated last quarter, we expect our 2025 net interest expense to be approximately 30 million higher than 2024, largely due to the elimination of our convertible debt, which was at a higher cost of capital and the replacement of our interest rate swaps, which expired this quarter. For the year, we still expect our non-GAAP tax rate to be in the range of 20 to 25%. As communicated last quarter, we expect the 2025 ending balance of our diluted share count to be around 71 million, which is approximately 5% or 3.5 million shares lower than prior year due to the extinguishment of our convertible debt. From a cash perspective, on an annual basis compared to prior year, we expect free cash flow to be higher despite higher capital expenditures, as we are now evaluating the acceleration of our manufacturing expansion plans due to the increase in global customer adoption. We remain excited and confident in our objectives to drive growth, expand margins and increase profitability and free cash flow, all contributing to long term value creation. Before moving to Q&A, I want to take a moment to share a leadership update. Later this month, Claire Trachtman will join Insulate as our new Vice President of Investor Relations reporting to me. Claire joins us from Baxter, where she served as Vice President of Investor Relations for the past decade. She brings significant METTEC investor relations experience, and her addition reflects the continued strengthening of our leadership team under Ashley's direction as we look to the future. We are incredibly grateful to June Lassaroff for her thoughtful interim leadership of the IR function and for her continued support to enable a seamless transition. June will remain with us through the end of August. With that, Operator, please open the line for questions.

Thank you. If you have a question at this time, please press star, then 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. In the interest of time, we ask that you limit yourself to one question. You may rejoin the queue if you have additional questions. As a reminder, the speakers available for Q&A today are Ashley McEvoy, Ana Chadwick and Eric Benjamin. Our first question comes from the line of Robbie Marcus from JP Morgan. Your line is open.

Hi, this is Lily on for Robbie. Thanks so much for taking the question. Both the US and international came in nicely ahead. So can you talk about some of the drivers of the upside, both in the US and internationally and the trends that you're seeing in those different geographies across new patient growth?

Thank you, Lily. Listen, we're pleased to see that really our strategy is working. We continue to lead in type one. As you mentioned, we're driving very strong adoption as the first mover in type two. Our international growth is accelerating and we are continuing to invest in platform innovation and clinical outcomes. I mean, US, you can see from where we command the largest customer base there. Our new customer starts are off to acceleration both year over year and sequentially. And I think in the US, we're really seeing very strong adoption of the Omnipot 5 based upon very, very strong clinical outcomes that we've been sharing at the ADA. And we continue to integrate those with the latest sensors, as mentioned with the G7 and iOS compatibility. And I would say type two in the US, very strong momentum based upon really bringing the science and the evidence to the clinicians. As you know, we have a very strong history here and equity over built over 25 years with the endo community in type one. And we're leveraging that as we start to penetrate the type two community and OUS, as we mentioned in our remarks, we have a very strong concentration in three key markets, UK, France and Germany, which comprise the majority of our business. OUS and all of those are really benefiting from the launches of Omnipot 5. And then as we've mentioned on prior calls, we've also expanded Omnipot 5 now to inclusive of total of 14 markets. And all of those are driving strong adoption. Thank you for the question, Lily.

Your next question comes from a line of Travis Steed from Bank of America. Your line is open.

Hey, congrats on the quarter and congrats on hiring Claire. She's a well-loved IR person, so good get. And I wanted to ask on type two and the new starts, you said they accelerated this quarter. What do you think kind of drove that acceleration? Can acceleration kind of continue in the back half of the year and just kind of get an update on kind of the overall type two opportunity here?

Thank you, Travis. Well, listen, I mean, type two, as we know, is like a massive opportunity with a large TAM, and it's great to have a first mover advantage. And as I mentioned, we're really parlaying and coming from a position of strength of 25 years, really getting AIT therapy, endos and hyperscribing PCPs comfortable with that. You know, when we look at type two, the framework that we're we're abiding by is number one, really sharing our strong clinical evidence. We share this again with the ADA and secure TDD. We do, in fact, lower A1Cs and we improve time and range. Second is really we have very strong market access and ease of use. Our I like to say not all pharmacy access is created equal, but we have access to 47,000 pharmacists, Travis, where we have also coverage over 300 million lives are covered with Omnipod in a preferred position with very low co-pays. In fact, on average, it's around a dollar a day for our patients. And that really has enabled very strong access as well as affordability. We've been working on our field. You know, you mentioned that we've been expanding our field for getting them really comfortable to not just sell on our unique form factor, but to also to sell on the science. And also we are sourcing not just patients from MDI, but as Anna mentioned in her results, we actually did experience our quarter the highest in eight quarters where we sourced some of that volume from competitive users. So I just think that we just got to continue to get the word out that we have a highly differentiated technology with really strong outcomes.

Your next question comes from the line of Jeff Johnson from Baird. Your line is open.

Thank you guys. Good morning. Congrats on the strong quarter. Ashley, you know, as we're all trying to get to know you a little bit better here, I think one of my questions just such a strong raise in to Q here and to Q can be a tricky quarter because, you know, I think a lot of companies would like to leave it at that. They would like to leave a little bit of room for three Q and four Q as well. So just your overall framework and how you think about guidance. Do you like to set guidance at, you know, realistic numbers? Are they numbers that you feel maybe a little aggressive, a little conservative, just kind of your framework for how you think about guidance, especially after today's strong race. Thanks.

Thank you, Jeff. I think, you know, what Anna's commentary of future guidance, it really reflects the remarkable business that we've had year to date in 2025. And my philosophy and guidance really doesn't change from what insulin has been sharing with the community. And I'll turn it to Anna to add some remarks.

Yes, you know, we said guidance with the full intent to hit it. Nothing has changed in our fundamentals. We're excited to have raised guidance here by five points. And it's actually three times the beat we had here in the second quarter. And this reflects that, you know, we're seeing the momentum and we're leaning in and we'll keep you all updated.

Your next question comes from the line of Larry Beegleson from Wells Fargo. Your line is open.

Hi, morning. This is from Ronan for Larry. Thanks for taking the questions here and congrats on a really strong quarter. Maybe just to focus on the US business. If I, you know, take all the pieces of the guidance, it implies about 14 to 22% growth in Q4, if I'm doing my math right, which is a pretty wide range. So can you talk about what gets you to the high end versus like the low end of the range? And how should we think about that in the context of 2026? You know, is 20% growth still a good way to think about the US business going forward?

Thank you for joining us and I'll turn it to Anna to make some remarks.

Great. You know, our underlying business trends are very stable. Let me unpack some key dynamics. Specific in the US, we have talked about stocking and rebate dynamics. When you take those into account, our first half normalized growth rate is 24%. And in the context of that, our back half guidance is very strong. We do not anticipate anything changing here, just the momentum continuing and we expect to have a positive update for all of you guys as we get into our third quarter earnings call.

Your next question comes from the line of Joanne Wench from Citibank. Your line is open.

Good morning. Nice quarter and thank you for taking the question. Internationally, it sounds like it's going quite well for you with the target on four countries. How do you think about expanding those or expanding the footprint as you push further outside the United States? Thank you so much.

Thank you, Joanne, for the question. Yeah, I mean, our international business had a very strong quarter and really our kind of three key drivers of profitable growth outside the United States are one, continued penetration of our existing markets like the UK, France, and Germany, where I would say we have strongholds and there's lots of opportunities to really increase penetration in those stronghold markets. In those markets, with the launch of Omnipot 5 and the conversion from Batch to Omnipot 5, we are commanding a positive price mix realization. And then I would say we're being very thoughtful around what are the other markets to expand to so that we can ensure that we're meeting people with diabetes, but in a very financially disciplined fashion. Some of the markets that we've launched Omnipot 5 like Canada, Australia, the Netherlands, they're all going very well. We've queued up some additional markets that we plan to share with you on November 20th at Investor Day, but we really are having a balanced strategy, I would say, on going deep and valuing depth. You know, as we assess what markets that we go broad on.

Your next question comes from a line of Shagun Singh from RBC. Your line is open.

Great. Thank you so much. I was hoping you could shed some light on second half guidance. I think it assumes about 21% selling day adjusted growth versus 30% in the first half. So, you know, can you maybe just elaborate on some of the assumptions behind the 2025 guidance? What drives the step down in Q2? Is it conservatism or are there other factors to consider? And you did call out for US Omnipot revenue in Q2. You called out some stocking dynamic and some tailwind around rebates. So if you can just help us with some of the puts and takes to come up with the underlying growth, that would be helpful. Thank you.

Sure, Shagun. This is Anna. As I mentioned, you know, on our underlying basis, our business is very, very stable here. And unpacking some of the dynamics, you just called stocking as one. Absolutely. And then also the rebate dynamic. So when you put all of those together, our first half US normalized growth rate is at 24%. And in that context, you know, the guidance here is very strong. And we're lifting by quite a bit, as I mentioned just now, we are raising our guidance by three times the beat that we had here in the second quarter. So we're leaning in because we're seeing this momentum sticking and being strong for us. And we look forward to giving you a positive update as we go into our third quarter earnings. So everything is trending and growth is strong.

Your next question comes from a line of David Roman from Goldman Sachs. Your line is open.

Thank you. Good morning. I just want to echo Travis's comments on Claire joining the company and the opportunity to work with her directly and thinks she'll be a great addition to the team. And just want to also thank June. All of our supporters have gotten up to speed here on the company. Maybe I was asked on a comment that you made kind of towards the latter part of the call around increasing capex to support higher demand. Can you maybe go into a little bit more detail there on how demand has shaped up relative to expectations? And if that acceleration in capex is a reflection of a view of demand tracking ahead of original expectations and a view that that can continue here and how we should kind of put those pieces together.

Thank you for the question, David. I would first start with again, we have a history here of investing ahead of the curve of making sure that we have the appropriate amount of capacity to say yes to all of the demand and very pleased with how the team has been executing really the past year of adding new lines into actin, which are fully up and producing high quality pods, as well as extending our presence in Malaysia and getting that plant to grow. And we're coming up on our year anniversary to really meet the global demands. And we've been a pioneer in advanced automation and manufacturing capabilities and we'll continue to do that. So what Anna was referencing is you're going to see us continue to invest in our supply chain build out to make sure that we stay ahead of the curve of meeting global demand.

Your next question comes from a line of Michael Pollark from Wolf Research. Your line is open.

Good morning. I'm interested in the comment on the recent Medicare proposal around competitive bidding and shifting payment in the DME channel to pay overtime. Look, I understand you're not directly exposed here. You have chosen a different business model. And so kind of nothing to say on that. But but if this moves forward, the industry stands to change quite a bit. And I'm interested what pod thinking about as to how to stay ahead of those potential shifts as you digest what's a very complex suggestion rule from from the government. Thank you.

Thank you for the question. Mike and listen, we've we've been reviewing the CMS proposal. We clearly support the increased access to the latest technology for diabetes management. You know, as you know, we are available to patients on an as you go basis, a pay as you go. And it's sold with near 100% of our distribution through the pharmacy channel, as I mentioned, 47,000 pharmacies. So we we clearly think that insulin delivery systems that are part of Medicare Part D are not eligible for competitive bidding under the Part B. And we are going to continue to gauge in CMS to really talk about the benefits of our differentiated on the five technology and how we improve care for people with diabetes.

Your next question comes from the line of Richard Newiter from truest securities. Your line is open.

Hi, thanks so much for taking the questions and congrats on the quarter. I'm wondering if you could just comment a little bit on the how the two indication is potentially allowing you to better compete for type two patients versus the competition. How much of the the momentum you're seeing there from last quarter or the last few quarters is that indication versus converting to marketing initiatives direct to patients.

Thank you, Richard. And thanks for interested in pod. Appreciate you guys joining. I'm going to turn it to Eric.

Richard, this is Eric. Maybe just some color on type two, the indication and competition. And if first the indication is really helping us build the market as first movers in type two. And we have the security to the study, which shows point a one reduction on average and significant a one reduction up to two percent for those with a one C over nine. And that kind of clinical impact really resonates with prescribers who are looking for solutions for those who live with type two diabetes. So what our team is doing is they're bringing the power of that evidence to folks with whom we have strong relationships and we're activating more prescribers getting them comfortable prescribing a I.D. As it relates to competition, I mean, part is just so differentiated and so simple to use that it gives us some strength in addition to that body of evidence that help us compete in the market. In addition to the strength of technology, we're also unique from an access perspective. We are available in a pay as you go capacity at Copa is typically about a dollar a day right where they get their insulin. And we continue to work on how we simplify that customer journey to help those who wouldn't otherwise have access to technology get the benefits of Omnipod.

Your next question comes from the line of Izzy Kirby from Redburn Atlantic. Your line is open.

Hi, guys. Thanks so much for taking my question on type two. I'm sorry if I missed this, but did you break out the proportion of new starts in the U.S. coming from type two? I think that's usually something we've had from you guys. And then just following on on type two, how should we think about who is prescribing type two scripts early doors? Is it leaning more primary care? Still very much in the end, those days. And then what do you think in terms of direct to consumer needs as well? Thank you. Thank

you, Izzy, for the question. Let me kind of first start with our strength in our U.S. type one in the United States. We had very strong improvement in our total customer base and our total prescriber base, as well as our new customer starts. And that has enabled us to maintain the position of being the number one most prescribed, the number one most requested AID and number one and new customer starts in the United States for type one. And that really is our core business. We are parlaying a lot of that leverage to high prescribing endos first and really ensuring that they're following the science as endorsed by the ADA on standards of care using AID therapy as first line of therapy. And we're I like to say taking the science to the street of making sure we get that that cohort really comfortable as they are equally comfortable with the type one community. And then we're working with them to help influence and get the confidence and high prescribing PCP in the marketplace. So we're actively invested in our science and scaling up our sales force to get comfortable with the science to really follow the guidelines. And as we shared, the new customer starts coming from type two in the United States are approximately about a third of our new customer starts in the United

States. Your next question comes from a line of Matt Taylor from Jeffries. Your line is open.

Good morning. Thank you for taking the question. I had a related question on your last comment there you talked about earlier on this call about 25,000. Describers I think and it sounds like the sales force expansion has been relatively seamless. I was just thinking that's kind of I think calls out 100,000 prescribers in the US. Do you think that we'll continue to see that kind of growth towards the DEXCOM number over time or are you viewing your growth in the future coming more from quote unquote same store growth?

Thank you for the question Matt and I welcome you to come you know when you hear our whole story at Investor Day and Act In on November 20th. But we I mean we're seeing really strong growth on our core where we also have very low penetration still and a lot of room to go in the United States. And then I would say that we are have a new indication. It's really a green field in the type two community that the continuous glucose monitor sensors have are out there first driving broad adoption. In insulin using and non insulin using patients, but we have a lot of opportunities to drive continuous continual growth. It's not going to be a linear line per se. I would say on type two because this is a new market that we're creating and we're learning and we're honing our approach. But we're very pleased with we're coming off on nearly one year of really talking this with the clinicians and patient community. So stay tuned for more as we talk about it on November 20th.

Your next question comes from the line of Bill Plovenik from Kenna Cord Genuity. Your line is open.

Great thanks for taking my question. You know I actually I think when you first started there was some fear about operating margin expansion and maybe some of the reinvestments you talked about. And it's interesting you know you had significant leverage especially on the SG&A component of that this quarter. I was wondering has anything changed there? Did you free spending? Did you just change what the strategy and the investment was? And you've not yet just implemented it and how should we think about that kind of going forward? Thanks.

Thanks for the question. I would say our strategies are in fact intact. Our type one you know we're leading in type one. We're creating the market in type two. We're growing profitably in international markets and we're advancing our innovation agenda and supply chain. I mean when you if you were to ask me areas that I think that we can move faster and to deepen our advantage and where we plan to put to invest additional capital I would call out four areas. The first is accelerating the pace of innovation across algorithms, sensor integration, our next generation architects for like hybrid closed loop and our fully closed loop as Eric was mentioning of what's in clinical trial right now. Second is about being the market maker continuing to be the market maker and driving market development by bringing the evidence the scientific evidence to the health care professionals and patients and continuing to improve what we think is really superior access and affordability in our markets. The third that we're looking to invest more is our commercial excellence and our commercial engine and demand generation. I talk about selling our science in addition to our unique form factor and leveraging our brand as Eric was mentioning to create a more seamless customer experience from lead generation to retention. And then finally continuing to build global scale and resiliency in our supply chain to to really serve the next leg of demand and increase our cost advantages.

Your next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is open.

Good morning. Thanks for taking that question. I want to ask you about that comment on an acceleration. I think Anna Maria mentioned in competitive conversions in the quarter. Can you just talk a little bit about what drove that? And is that the commentary about MDI acceleration of record new patient numbers in Q2? Is that excluding the new competitive conversions? So on its own MDI would have accelerated and then the competitive conversions are on top of that. Thank you.

Go

ahead.

Yeah. Good morning. So let me deal with the numbers first. So yes, an MDI accelerated and competitive conversions accelerated and both type one and type two grew year over year and sequentially in terms of what's driving that. Yeah, we think it's a couple of things. First, we've delivered impactful innovation. Omnipod 5 is safe, effective, understood to be really easy to use. And we've done a great job making it accessible. So that pay as you go access with no commitment at low copay makes it easy for folks to get started with that great technology. Additionally, our team is doing a great job executing in the field and serving customers. And it's really those three things. Innovation, access, execution and market.

Your next question comes from a line of Danielle and Telphy from UBS. Your line is open.

Hey, good morning, everyone. Thanks so much for for taking the question and congrats on a really strong quarter here. I just wanted to follow up on the primary care physician side of things. And I'm just curious if you guys could talk about maybe Eric, this is for you. Sort of how the go to market strategy with primary care differs from endocrinologist, you know, and those have been adopting pumps for a very long time. Primary care, you know, they're dealing with a lot of other things besides their in addition to their diabetic patients. So just just curious about how heavy the lift is in primary care versus endo and sort of how you guys are adapting to that. Thanks so much.

Thank you, Daniel, for the question. You know, I would say a couple of things. One, it really you asked about endos and high prescribing, you know, PCP in the US marketplace. And I would say our highly differentiated technology, which is really simple to use, has had a remarkable early impact on people with type two. And who perhaps may have be fearful of complex what they view to be complex technology. And because of that, we're starting to get really good adoption rates. And what we're finding from the high prescribing where the PCP audience who are insulin intensive, that simplicity of technology coupled with the strong science, which shows the clinical outcomes of reducing A1C's and improving time and range and also, you know, slowing down the weight of the disease.

Maybe just briefly, Danielle, I think what we see is that those who've been prescribing idea is a question a lot about changing how they think about idea as it's relevant to the folks who live with type two diabetes that they're seeing in their office every day. And so it's a lot about selling the clients and helping them see that as a great solution for that population that they're already caring for. When we go into an office that may not already be prescribing idea, it is just a little bit of a conversation. It's about how do we provide support to them, which may be new for them and helping them get folks trained and care for folks once they're on product. And so we educate on that experience and how we make that easy for them.

Your next question comes from the line of Jason Bedford from Raymond James. Your line is open.

Good morning and congrats on the progress here. Just on the international business, big step up sequentially, growth accelerated off a already high level. It didn't sound like it, but was there a notable contribution from any new geographies? And just one other quick one, thinking of the volume price mix. Where are you in terms of O5 adoption within your international base? Thanks.

Thank you for the question. I'll have Anna answer now.

Absolutely. Yeah, you know, 39% great growth. What we're seeing is Omni-POD 5 conversions are now up to about 50% of our total. That's a rapid growth from last quarter, which was about 40. So that price mix realization is kicking in. And the way to think about it is in that 39%. This quarter we had a bit of an outsized amount of that price mix realization in the low double digits. So we're very pleased with the durable growth that we have across the markets, as we mentioned in our more established markets that we've been a couple of years. And the new ones just ramping up. So durability of the growth in international is here with us.

Your next question comes from a line of Matt Mick sick from Barclays. Your line is open.

Thanks so much for taking the question. Maybe just a follow up on the last question on really impressive overseas growth. You could talk maybe a little bit about the mix and effect of having such a strong outside the US geographical contribution down the P&L, if there is any notable differences in the way that kind of drives the P&L. And then also the way that you scale into some of these geographies in addition to kind of the mix to OmniPOD 5. Is there a follow up to the last question? Was there kind of a step up in, I don't know, new distributorships or significant steps that we can build off of that maybe kind of feed back into your views in the back half and how you're thinking about guidance. Yeah, great.

Great question. I'll start and maybe others here will add. But as we've talked about before, we have these layers of built in growth. So we started UK and Germany over two years ago. Then we went with France and Netherlands. And now we've expanded that to nine more markets. Having said that, key thing to point out is the launch of OmniPOD gives us a lift. Then the second thing that happens is we add capabilities, right? We add sensors and that gives us a further lift. And third, we're working with the different health authorities to continue to expand the access. So this is part of that durability. And the other thing to mention in the price mix realization is we're only 50% of our customer base has converted from Dash to OmniPOD 5. And this is in addition to all the MDI conversions that we're getting. Hope that gives you a flavor of our durable growth in international. Yeah,

the only thing I would add to that, Matt, is to say it's really consistent with the strategy to build the market and to really be the market maker and the team working in the UK to establish nice guidelines, you know, to really get AIB therapy as a standard of care or working with the French government where we got full reimbursement. And so those market access and development levers allow a differentiated technology like OmniPOD 5 to really come in and drive penetration, earning and commanding a price premium as we elevate the transition, not only just from our Dash users, but from really converting MDI users over to the latest technology of OmniPOD 5. And we have launched, as Ana mentioned, you know, we launched in Italy this year, in Nordics, in Australia, Belgium, Switzerland, Canada. They haven't had material impact to date. A lot of the majority of our growth of OUS is coming from our three core markets. So we anticipate them to start to contribute in the next upcoming quarters.

Your next question comes from a line of Chris Pasquale from Nefron Research. Your line is open.

Hi, good morning. This is Carol for Crest. Thanks for taking the question. I just wanted to follow up on the gross margins. It looked like you would have exceeded 71% the first half, the excluded inventory charge. And your outlook on tariffs has improved by about 30 bits. And it looks like you reiterated your margin guidance for years. So how are you thinking about the second half and if you see potential for any underlying improvements there? Thank you.

You know, great question. All the things you mentioned are spot on. I just want to point maybe in addition we're seeing on a year over year basis some of that FX pressure as well as quarter over quarter in the tune of 30 basis points. We feel the underlying performance of the business in operations is very strong. Year to date, we're sitting at .7% and for a full year guide of 71%. This represents 120 basis points. This guide represents 120 basis points expansion on a year over year basis. So stay tuned. We'll continue to update, but we feel we're in a very good position to deliver the 71%.

And this concludes our question and answer session. I will now turn the conference back to Ashley McEvoy. Thank

you. Well, I appreciate everyone enjoying. I'm clearly excited about the opportunity that we have to scale this remarkable business and create value for shareholders, but also importantly improve the lives for millions of folks with diabetes. I wanted to thank June for your stewardship and wish you all the best. And I wanted to welcome Claire and really give a shout out to thank team insulate for.