Tandem Diabetes Care, Inc.

Good day, and thank you for standing by. Welcome to the Tandem Diabetes Care Third Quarter 2022 Earnings Call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during your session, you may press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susan Morrison, EVP and Chief Administrator of... Please go ahead.

Hello, everyone, and thank you for joining Tandem's third quarter earnings call. Today's discussion will include forward-looking statements. These statements reflect management's expectations about future events, product development timelines, and financial performance and operating plans, and speak only as of today's date. There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements. A list of factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is highlighted in our press release issued earlier today and under the risk factors portion and elsewhere in our most recent annual report on Form 10-K, quarterly report on Form 10-Q, and in our other SEC filings. We assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or other factors. In addition, today's discussion will include references to a number of GAAP and non-GAAP financial measures. Non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operations. We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods. For additional information about our use of non-GAAP financial measures, please refer to our press release issued earlier today. Our call today will be led by John Sheridan, our president and CEO, and Lee Vossler, our executive vice president and chief financial officer. Following their prepared remarks, we'll open up the call for questions. Thank you in advance for limiting yourself to one question and one follow-up before getting back into the queue. I'll now turn the call over to John.

Thanks, Susan, and welcome everyone to today's call. In reflecting on 2022 so far, and the third quarter in particular, it's been a year filled with both successes and challenges. I'm going to spend a few moments up front talking about our recent business trends before asking Lee to provide some color on our financial results and near-term expectations. Then we'll conclude our prepared remarks with a pipeline update. Starting with a highlight from the quarter, TANF has a long-standing goal of bringing the benefits of our technology to more people living with diabetes. In the third quarter, we reached an incredible milestone of having more than 400,000 people worldwide using our T-SLIM X2. It's an achievement I'm proud of, and it's evidence that we are making measurable strides towards our longer-term goal of having 1 million customers. As we advance toward this goal, we do not expect our growth to be linear. We anticipate there will be periods of more moderate growth between more exceptional periods driven by our introduction of new technologies. where we stand today is more of the former, in part due to the timing of our own product cycles, in addition to the recent macro environment and industry-related headwinds. Similar to what we discussed in our last earnings call, we've largely been pressured by three dynamics that continued throughout Q3. First were the pandemic-related pressures that have fluctuated throughout the past two years. These include an array of things from COVID case rates to endocrinology office staffing shortages. Second was a competitive environment in the United States. And third were the economic conditions, including inflation and the threat of recession. To provide an update on each of these dynamics, the broader COVID-related pressures began escalating in Q3 of last year in all our markets. It's now a consistent factor when looking at the year-over-year comparison and an environment that we anticipate operating in for the foreseeable future. The second dynamic is the competitive environment in the U.S. This intensified across the year in line with the competitor's scaling launch of a new AID algorithm, which is on a device form factor that we've competed with historically. In surveying our sales management, the majority said the disruption associated with this launch is less than what we've experienced a few years ago when another competitive AID system launched. That being said, it creates noise in the market that we'll be navigating and managing for the few quarters. What's been very rewarding in this heightened competitive environment is to hear the broad clinician feedback that ControlIQ remains the leader in AID systems. The vast majority of our customers have ControlIQ, and we've amassed more than 100 million patient days using the system with incredible user experience and clinical results that demonstrate immediate and sustained benefits using our technology. It's also been great to see our customer satisfaction remain high. and as a result, our low levels of attrition are consistent with what we have seen historically. This substantial visibility to custom utilization data comes from our iOS and Android mobile applications that launched about two years ago, which automatically and wirelessly upload data to the cloud from our T-Slim X2. I am also proud that we continue to expand the insulin pump market As in the third quarter, about half of our new customers reported adopting insulin pump therapy for the first time. On the final market dynamic, the impact of the economic environment on customer purchasing behavior is primarily a U.S. phenomenon. This pressure is something that we saw build quickly at the end of Q2 and has remained steady. To support our U.S. customers who want the benefits of our technology but are concerned about cost, We began broader marketing of our payment plan program beginning in September outside the United States, partially mitigated by the predominance of government healthcare plans. Overall, the level of pressure from each of these dynamics fluctuated throughout the quarter. In the U.S., we typically see a steady seasonal uptick in demand across the month of Q3. This year, August results were in line with these expectations, which we noted at the beginning of the momentum build. But then, different from years past, the same level of momentum did not continue across September. The variability of each dynamic makes it difficult to speak to any one of them as getting better or worse, but has been consistent in aggregate since the latter part of Q2. In this environment, our teams are motivated and confident in our product offerings available today. This is what we remain focused on in advance of our new product launches, which we continue to invest in heavily. Operationally, we are also focused on identifying and working to implement lean initiatives to further leverage our infrastructure. This includes systems improvements, such as a cloud migration of one of our key core systems in Q3, which created some disruption in September operations, but was important to have done so before the fourth quarter. We're also furthering our efforts outside the United States, where the number of people using our TESOL Next2 pump continues to grow. In the third quarter, we launched our TISM X2 with ControlIQ in Israel and Portugal, which brings the geographies we serve to approximately 25. We'll continue to look at new opportunities to bring our technology to people living in smaller markets outside the United States while executing our primary international strategy of driving greater adoption in the under-penetrated areas we serve today. We're also working to expand our product offerings outside the United States and in support of this goal, in the third quarter, submitted a regulatory filing for our mobile app. This is the first step towards being able to offer mobile phone-controlled delivery of insulin to our customers outside the United States. Reflecting on our recent experiences in the past few quarters, we are taking the opportunity to recalibrate expectations for the fourth quarter and set a new baseline for 2023 with even greater caution. As Lee will discuss, we will be factoring in the persistence of the current macro pressures in anticipation that they will continue to exist for the foreseeable future and that any relief from them will serve as upside opportunities. Similarly, we anticipate driving additional upside opportunities through our introduction of new technologies to the diabetes market. I want to be clear that this reset is to properly align your term expectations. It does not change our consistent continued expansion of the insulin pump market or that we continue to capture competitive share. With pump penetration just over 35% in the U.S. and typically less than 20% in countries we serve outside the United States, we remain focused on the large market opportunities available to us and further delivering on our goal to bring the benefits of our technology to the diabetes community. I'll now turn the call over to Lee for more on our financial results and our guidance expectations.