Tandem Diabetes Care, Inc.

Thank you for standing by, and welcome to the Tandem Diabetes Care Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. and now I'd like to introduce your host for today's program, Susan Morrison, Chief Administration Officer and Investor Relations. Please go ahead.

Hello and welcome to Tandem's 2026 second quarter earnings call. Today's discussion will include forward-looking statements. These statements reflect management's expectations about future events, our product pipeline, 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, which are described in our press release issued earlier today and under the risk factors portion of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Today's discussion will also include references to both GAAP and non-GAAP financial measures Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of non-GAAP measures to their most directly comparable GAAP financial measure and other information regarding our use of non-GAAP financial measures. John Sheridan, Tandem's President and CEO, and Leigh Vosseller, Executive Vice President and Chief Financial Officer, will be providing prepared remarks on today's call. after which the operator will open up the call for questions. Thank you for limiting yourself to one question before rejoining the queue. I'll now turn the call over to John.

Thanks, Susan. We appreciate everyone joining the call today. The second quarter marked an important step forward for Tandem. We are executing it against our strategic priorities while demonstrating operational momentum, improving our financial performance, and providing broader access to our technology. This progress was evident in our results, with worldwide pump shipments growing more than 10% year-over-year and sequentially. In the U.S., a highlight of our performance was improvements in new pump start trends, led by a standout number of people transitioning from multiple daily injection. Internationally, we saw an acceleration of adoption in the countries where we launched direct efforts earlier this year. Additional Q2 highlights included significant margin improvement. including the second highest gross margin of any quarter in our company's history. We also advanced the global launch of new technologies while preparing to expand our portfolio with the FDA submission for Tandem Mobi's tubeless feature. We'll discuss each of these accomplishments in greater detail on the call today. I'll begin my remarks with an update on the three strategic priorities we laid out at the beginning of the year, which included reshaping our business model, modernizing our commercial organization, and delivering new technology. In March, we launched pay-as-you-go reimbursement in the pharmacy channel. This transition was designed to create clear benefits for customers, prescribers, and payers with better economics to tandem. During the second quarter, our focus was on early implementation. This included updating the end-to-end processes for how our technology is prescribed, how we support customers, and how our orders are processed. We are encouraged with the momentum behind this transition and beginning to see efficiencies that are positively contributing to our results. We now have approximately 45% formulary coverage, which is already approaching the high end of our range for the goals this year. Access is a critical first step to driving PAYGO adoption, and teams are now focused on driving plan utilization. In our first full quarter offering PAYGO, U.S. sales through the pharmacy channel increased to 10%. This early traction reinforces our confidence in the pharmacy strategy and the broad reaching benefits it can deliver. The second key initiative I'll touch on is modernizing our commercial organization to improve productivity and support profitable growth. The work has been underway for the past year, and we are pleased with the progress. Key accomplishments include the deployment of a new CRM system to improve Salesforce efficiency and effectiveness, provide deeper insights into our customer base, and support our global channel strategy. This includes enabling our U.S. pharmacy transition and supporting direct commercial launches internationally. Our international direct launches began earlier this year in the U.K., Switzerland, and Austria, with plans for France to follow in the fourth quarter. This strategy better positions Tandem to serve our customers and healthcare providers in these markets while strengthening our financial profile. The final key initiative I'll discuss is our delivery of new technology, starting with the expansion of our global portfolio. We continue to reinforce our competitive advantage with Control IQ+, which now has the broadest indication of any AID system in the U.S., including pregnancy. Similarly, we strengthen our advantage internationally, as we receive CE Mark and Q2 for pregnancy, as well as adults living with Type 2. Great excitement is also building internationally, as we are in the early stages of introducing Tandem Mobi outside the United States. We plan to bring our tiny pump with big outcomes to more than 10 countries by year end, including some of our largest markets. In addition, our team has been working to broaden CGM compatibility. For Abbott's Freestyle Libre 3+, T-SLIM is now compatible in seven countries outside the United States. We plan to expand to additional markets throughout the year. Dexcom's G7 15-day sensor is now compatible with Mobi and T-Slim in the U.S., and international markets are soon to follow. These launches are consistent with our efforts to ensure the broadest possible coverage across devices and markets. Looking ahead, the team continues to drive long-term innovation across our pumps, infusion technology, software ecosystem, and AID algorithms. Starting with pumps, We've reached an important R&D milestone in Q2 with a 510 case submission for Mobi tubeless. This new infusion site option is designed to transform the existing Mobi pump into a tubeless AID system, giving users unique flexibility to choose between tubed and tubeless wear on a single hardware platform by simply changing the supplies they use. Compatible with the existing Mobi pump, subject to FDA clearance, This will be Tandem's first tubeless pump offering and the world's first with extended-wear technology, an important differentiator that enhances our position in this dynamic market segment. Pre-commercial preparations are actively underway. Our goal remains to begin a scaled launch this year, after which time we'll begin training our field and HCP community on the novel tubeless Mobi feature. We will also begin updating our payer contracts and completing operational activities in support of the launch. Infusion technology is another key area of focus as we work to expand tube and tubeless options, improve comfort, extend wear time and simplify the user experience. To support this, we are launching AutoSoft Plus, a new infusion set designed to enable quick set changes with reliable one-handed insertion. We introduced AutoSoft Plus in Canada in late July and plan to expand to additional geographies including the U.S. later this year. This timing is important as we continue to manage shortages from our key infusion set supplier. We believe Q2 was the period of greatest impact and our supplier expects availability to improve through the second half of the year. The launch of AutoSoft Plus is expected to reduce the demand for the SKUs currently under allocation. Looking to the first half of 2027, we plan to provide further choice in infusion sets with the launch of SteadySET. are proprietary technologies FDA cleared for wear up to seven days, which is now in manufacturing scale up. The last technology advancement I'll discuss is automated insulin delivery. Since TANF was founded, we've maintained our vision of creating an AID system worthy of the term artificial pancreas. Today, we are closer to this vision than ever and excited to begin sharing more details. Under our longstanding research collaboration with the University of Virginia, We are advancing their next-generation ATAnet algorithm into a compelling full-enclosed loop experience for everyone. ATAnet, which stands for Automated Insulin Delivery, as an adaptive network, has been under active development and clinical testing for the past several years. We are developing a system designed to help both type 1 and type 2 users meet the clinical time and range guidelines, whether they are new to pump therapy or long-time users. Our goal is to achieve this without meal announcements or other user inputs. But because diabetes can vary day to day, we are also designing the system to incorporate additional user context and respond in more personalized way. This is an ambitious goal, but advancing closed-loop technology requires solving the most complex real-world use cases. Over the past two years, our development and user experience teams have been working toward that objective, culminating in FDA approval of an IDE in Q2 and positioning us to begin a pivotal study later this year. Overall, the second quarter progress reflects the strength of our execution across the priorities that we set for the year. We remain encouraged by momentum that we are building and remain focused on translating these initiatives into broader customer impact while improving our financial performance. With that, I'll turn the call over to Leigh to provide more detail on financial results.

Thanks, John. Our second quarter results reflect strong execution and accelerating progress across our strategic initiatives, which are beginning to deliver sustainable operational and financial benefits. It was a record second quarter performance worldwide for sales, pump shipments, and gross margin. Beginning with sales, we shipped approximately 33,000 pumps worldwide. This was driven by the continued demand for control IQ, new product innovations, and improved channel access. Worldwide sales totaled $255 million, increasing 6% year-over-year or 5% in constant currency. This was the 10th consecutive quarter we delivered record results for the respective sales quarter, which is a trend we plan to continue building on even during our business model transition. In the U.S., we shipped a Q2 record of 22,000 pumps, growing 7% year-over-year. We've seen improvement in the new start trajectory with Q2 new starts nearly flat to last year, but stepping up impressively by more than 20% from Q1. Notably, new customers coming from MDI grew mid-single digits year over year and now represent approximately 70% of new pump starts. This improvement was driven in part by increasing enthusiasm for Tandem Mobi, which now represents more than half of our shipments to new customers, as well as the availability of a more affordable option through pharmacy. Renewals at more than half of our pump shipments continue to be a robust source of business at double-digit growth. This retention is a direct reflection of the value we place on delivering high levels of customer service, driving strong customer satisfaction. U.S. sales totaled $179 million, increasing 5% year over year. This reflects measurable improvement in pharmacy adoption, partially offset by the expected impact of infusion set constraints from our key supplier. As John discussed, we continued the implementation and rollout of our PAYGO offering through the pharmacy channel that began in March. During the second quarter, our teams focused on educating patients and physicians about the offering, as well as optimizing the new processes and workflows for scale. In this first full quarter under the PAYGO structure, Pharmacy pump shipments were approximately 10% of total shipments. As a reminder, pump shipments through the pharmacy channels do not include upfront reimbursement, which creates a near-term headwind to revenue when compared to a traditional DME sale. This initial pump headwind is more than offset over time by higher pricing for recurring supplies from both new PAYGO customers and existing customers who transition from use of their DME benefits. In the second quarter, the initial headwind from pharmacy pumps was approximately $8 million, yet we still saw more than half of our sales growth driven by net favorable pricing. This benefit came from the 6% of our U.S. install base of approximately 325,000 people who used their pharmacy benefit to purchase supplies. As a result of this meaningful early adoption of both pumps and supplies through PAYGO, sales through the pharmacy increased to 10% of total US sales in Q2. In our first full quarter of offering PAYGO, pump adoption progressed slightly faster than supply conversions of existing customers and is expected to continue to do so in the third quarter. Directionally, we anticipate that each of these measures will continue to step up across the quarters as momentum builds, tracking in line to achieve the average annual modeling assumptions we illustrated at the beginning of the year. I'll also note that we are seeing a higher average monthly ASP for pharmacy supplies compared to the $350 per month originally provided for modeling purposes. We are not updating our baseline assumption at this time as we'd like to gain more experience, but needless to say, the early data is encouraging. Turning to our international performance, we shipped approximately 11,000 pumps in the second quarter, which is an increase of 19% year over year. While shipment growth in the quarter was primarily driven by our distributor markets, we are beginning to see encouraging traction in our direct European markets from our direct sales and marketing efforts, which reinforces our expectations for sustainable top-line growth and margin expansion over time. International sales totaled $75 million, increasing 7% year-over-year or 6% in constant currency. Direct channel sales represented approximately 13% of international revenue, More than double prior levels as we continue executing our transition strategy. Sales reflect approximately 3 million of headwinds related to distributor inventory buybacks in markets where we have already transitioned to direct operations, as well as de-stocking ahead of future transitions. Sales for the quarter were also impacted by our key infusion set suppliers constraints, which, unlike the US, were greater than anticipated this quarter. The impact was largely due to timing, as infusion sets were received late in the quarter, limiting distributor order fulfillment before quarter end. Turning to margins, gross margin was 57%, improving 5 percentage points year-over-year and 2 points sequentially. It reflects continued execution against our key margin drivers, including price appreciation from our global channel strategies and product cost improvements as MOBI volumes continue to scale. Operating expenses were $159 million, remaining relatively flat year over year, while we continued to invest in strategic growth initiatives in our global commercial infrastructure and product portfolio. Adjusted EBITDA margin increased to 3% of sales, demonstrating a positive result for the fourth quarter in a row. This continued improvement reflects the benefits of scale and sustained gross margin expansion, while maintaining investment in future growth opportunities. The stock-based compensation expense decreased meaningfully in the quarter to $16 million, or 6% of sales, down from 11% of sales in the prior year. This improvement reflects changes made in recent years to our equity granting practices to align with benchmarks for companies of our size. We anticipate the stock-based comp for the year will now be approximately $65 million, lower than our original expectation of $80 million. The reduction in this non-cash expense meaningfully contributed to the 8-point improvement in operating margin at negative 5% of sales. We ended the quarter with a healthy balance sheet including $456 million in cash and investments compared to $570 million at the end of Q1. The change reflects meaningful investments in a new CRM system to support global initiatives, the second annual payment under the Roche Settlement Agreement, and an additional strategic investment in Secure, A private company we have invested in since 2021. Secure provides simple mealtime insulin delivery through a wearable patch, offering a low-tech option for people with insulin-dependent diabetes who are not seeking an AID system. It complements our automation-focused strategy for insulin-intensive diabetes while providing insights into a new Type 2 segment to inform our long-term strategy. Turning to our 2026 expectations, we remain confident in our ability to deliver on our goals for the year and are reaffirming our sales and margin guidance. Worldwide sales are expected to be in the range of $1.65 billion to $1.85 billion. This includes U.S. sales in the range of $730 to $745 million and international sales in the range of $335 million to $340 million. We expect gross margins in the range of 56 to 57% and adjusted EBITDA margin of 5 to 6% of annual sales. For the third quarter, worldwide sales are expected to be approximately $265 million. This includes $180 million in the U.S., reflecting increasing pharmacy adoption. Internationally, we expect sales of $85 million, taking into consideration seasonality typically experienced in the summer months and modest improvement in the availability of infusion sets from our supplier. Gross margin is expected to be approximately 56% and adjusted EBITDA margin approximately 2% of sales based on pharmacy pricing dynamics as well as a planned increase in operating expenses in support of commercial initiatives. We continue to expect to achieve our highest margins for the year in the fourth quarter driven by an increasing percent of our U.S. installed base ordering pharmacy supplies, Seasonality in U.S. DME Pump Sales, and a larger direct presence in Europe. In closing, the strength of our second quarter performance demonstrates continued advancement against our strategic and financial objectives. We remain focused on driving sustainable growth, expanding profitability, and delivering long-term value for our shareholders. With that, I'll turn the call back to John.

Thanks, Leigh. Before we close, I want to recognize the entire Tandem team for the focus and care you continue to bring to work every day. Your efforts are helping us advance our priorities, support our customers and healthcare providers, and sustain progress across the business. Thank you for everything you do on behalf of Tandem and the diabetes community we serve. In conclusion, our second quarter performance reflects solid execution against the priorities we set for the year and reinforces our confidence in Tandem's strategic direction Looking ahead, we remain focused on building on this momentum, expanding customer impact through affordable and innovative technology, supporting profitable growth, and building our leadership position in diabetes technology. Thank you again for joining today. We are excited about the opportunities ahead and look forward to sharing updates on the continued execution in the upcoming quarters.

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. We ask that you please limit yourself to one question. You may get back in the queue as time allows. Our first question comes from the line of Matthew Blackman from TD Cowan. Your question, please.

Good afternoon, everybody. Can you hear me okay? Yep. How are you doing, Matt? Doing well. Thanks, John. Maybe, John or Leigh, could you just maybe talk about Some of the areas perhaps of friction in the pharmacy transition process that you're finding and maybe whether there have been any surprises, good or bad, in that discovery process. Relative to the full year guide you gave, just the conviction you have today still in that full year guide for 20% of pump shift through the pharmacy, 10% for the installed base, 15% of revenue. Anything that helps give us some confidence as well that the ramp is going as planned. Thank you.

Sure. Well, I'd say that we're actually very pleased with the early PAYGO experience. It reinforces our conviction. that this is an important and meaningful opportunity for the business. I would say that the things that we experienced this quarter would be the normal learning curve that comes along with implementing a new process. As we've said, the process actually, it's an end-to-end change in how we do business, how the ACPs prescribe, how we service the customers, and how we fulfill orders. So it's a meaningful change to the business. But I would say there was nothing that was surprising. We feel like we're on track. We're still continuing to work on developing efficiencies. I think that when you look at the performance, 10% of the sales went through pharmacy. When you think about that, it's really the first quarter of meaningful presence in the pharmacy channel. We're very happy with it, and it just continues to reinforce the fact that this is a significant opportunity for us, and we're going to continue to plug away as we have.

Thank you, John. Thank you. And our next question comes from the line of Richard Newiter from True Securities. Your question, please.

Hi, this is Felipe on for Rich. You know, your largest competitor called out retention issues in the type 2 community. So I just am wondering if you could maybe comment on your experience with type 2 patients in the quarter and if you're seeing any of those trends. Thanks for taking the question.

I think that, again, just like pharmacy, the type 2 expansion is another huge opportunity for us, and that's going to really drive growth going forward. It's an underpenetrated market, both in the U.S. and internationally. It certainly requires market development, and there's still a lot of learning to do. We're not going to talk specifically about the numbers today. It's early, and there's still a lot of sources of growth that's in process, but I will say relative to attrition, that our type 2 attrition, it's really modestly higher than our type 1 rate. And it's been stable over the past five years. And we've employed a strategy where we intentionally are selective and focus on patients who have the highest likelihood of success. And I think that's pretty much what's driving that success in the attrition for us. And as far as the indicators that I think that we want to keep track of, there's the C-peptide decision with CMS. We went and actually spoke to CMS in the last few weeks with a consortium of others trying to eliminate the C-peptide decision. And I think we made it very clear on what the impact is on the Medicare population of having to do this. And I think we left the meeting pretty optimistic. And it's this month, it's August, when we expect to hear results. We also expect tailwinds from Freestyle Liberty 3, from Movi Tubeless, Pharmacy Access, and, you know, we continue to invest in, I would say, just digital marketing and creating awareness with PCPs and HTPs. So, you know, I think we're, again, we're very excited about this. It's, you know, it's an important part of our strategy going forward and we anticipate seeing growth in type 2 MDI during the year and we'll continue to report on it as things go on.

Thank you, and our next question comes from the line of Larry Riedelson from Wells Fargo. Your question, please.

Good afternoon. Thanks for taking the question. Leigh, I think U.S. pump shipments were a little soft in Q2, you know, year-over-year basis, sequential basis for what we typically see, and new starts were flat, and I think, you know, you had expected them to be up year-over-year in Q2, I think. So is there anything to call out in Q2? And it does look like you need 12% to 13% year-over-year pump growth in the second half to reach the midpoint of the US pump guidance. So what are the drivers of that acceleration in pump shipments in the second half? Thanks.

Sure. Thanks for the question, Larry. So we saw strong growth. And remember, we're at the very beginning of a lot of our initiatives that we expect to gain momentum across the year. So to your question about what's really going to drive that back half strength, We have a number of new products under launch right now. And so an example would be Freestyle Libre 3, which we launched late last year. Mobi Android also late last year, early into this year. And we're already seeing results from that. We're seeing that our Mobi starts are growing to more than half of our new pump starts. We have Pharmacy, which as John spoke to earlier, it's the first full quarter of that. And it's really removing that affordability barrier that people have had to shift to pump therapy. And so as we drive that momentum forward, those are some of the areas that we expect to really give us that back half strength. One thing I'll highlight on the new starts this quarter, while we were just short a few hundred pumps from growth, actually what we saw were that MDI conversions, which arguably is the most important metric, grew mid single digits year over year. and it's been an improving trajectory over the last few quarters and so that's the signal that we need to support that we the confidence that we have for the year in terms of reaching that back cap strength and continue to see new start growth this year.

Thank you and our next question comes to the line of Matthew O'Brien from Piper Sandler. Your question please.

Hi, John, Leigh. This is Anna on for Matt. Thanks for taking our question. I guess I wanted to ask on gross margin was really strong in the quarter, you know, much better than we had modeled. And just curious to understand the thought process behind the reiterated gross margin guide, you know, given the outperformance there and the strong adoption you're seeing on the pharmacy side and curious why it's supposed to sort of step down sequentially. in the third quarter. So just any thoughts that would be helpful. Thank you.

Sure. Yes. So we are very excited to share this gross margin progress that we're making. It's something that's been, I would say, a point of contention for many years. And to have this significant of a step up is a really good demonstration of where this can go in the future. And that's on still a relatively low percentage of sales coming from pharmacy. and so two things really drove the strength this quarter. It was the pricing benefit from the pharmacy channel as we continue to push that adoption percentage. Also the fact that the MOBI volumes are growing and scaling and so that's contributing from a cost perspective. As we look ahead, we guided to a point step down in Q3 but still achieving that 60% gross margin in the fourth quarter and that just comes from the variability as we push this pharmacy adoption and so the two levers are really What percentage of pumps go through pharmacy at that zero dollar price, which actually creates a headwind on sales, which pressures the gross margin. And then you have that added benefit that comes from the people ordering supplies in the pharmacy channel. And so as we looked forward to the pacing, we anticipate that the pump Adoption Intego might outpace, in the next quarter, the pharmacy supplies adoption. And so that just plays a little bit with the margin optics, but in the long term, this is really gonna drive great strength overall as we continue to accelerate this initiative.

Thank you, and our next question comes from the line of Suraj Kamyah from Oppenheimer. Your question, please.

Hi, great, thanks. This is Jacob on for Suraj. Thanks for taking the questions. I guess just looking at tubeless MOBI and the ramp there, are there any gross margin dynamics we should keep in mind during the phase launch? Does it carry a different consumable mix or cost structure that could create any temporary changes in the margin before you reach scale?

Yes, thanks for the question, Jacob. It's a really important point. With any new product that you launch, you're not going to reach the full benefits until you get to a level of scale. And so much like when we first launched Mobu a few years ago, we saw a little bit of a headwind in gross margin, but not incredibly meaningful. It just more so keeps it flattened and not necessarily continuing to step up. But there's really nothing else to speak to. We're super excited for that technology to come to market. and so the other area I would speak to as we think about a launch of a product of that magnitude would be you might see a step up in sales and marketing as we make sure that we're getting the awareness out there as quickly as possible.

Thank you and our next question comes from the line of Joanne Wunsch from Citi. Your question please.

Good evening and thank you for taking the question. I would just want to double-click on Toby, and I want to confirm or ask if it has been filed with the FDA, and what is your current updated timing on that launch? Thank you.

Hi, Joanne. Well, I have to say we have filed it, and we did file it in the second quarter. Right now it's under review. We're very excited about this. It's, you know, we've made this clear. It's the first extended work patch that will be on the market. It's going to be a great product and we're very excited to have it out there. When it comes to what's next, I mean, we're obviously going to be waiting clearance, but we are planning on having clearance and actually beginning the scaling launch in the second half of this year. What we have to do still is once we get the clearance, there's some things we'll probably have to do to make changes in the documentation for the FDA. There's training we've got to conduct with our own people. And with HCPs, there's contracts we've got to go out and start to modify. And then we initiate this early access program where we put patients on the product for a few weeks to a month just to make sure that it's performing the way we expect it to. So we're planning for all of this, including kind of a and aggressive marketing program once it does get approved. And, well, again, really looking forward to getting this into the market this year. But it will be a scale launch for the rest of this year.

Thank you. And our next question comes from the line of Mike Kratke from LeeRink Partners. Your question, please.

Hey, everyone. Thanks for taking our questions. If you just to follow up on Matt's question earlier on the confidence in maintaining that 20% of US shipments through the pharmacy this year, I mean, it would seemingly require a fairly major step up for 3Q and 4Q. So just curious in terms of the quarterly cadence between 3Q and 4Q that's built into your expectations there. And is that 4Q exit rate a reasonable assumption for a jump off point for 27?

Thanks for the question, Mike. The way I'll start first is thinking about what the opportunity is. And today we already have 45% formulary coverage. And so we're at a point where we're nearing the high end of our range of goals for this year in terms of coverage and access. And so the opportunity exists. As John talked through how we launched in the second quarter, in the early months, there are just things you learn and you have to scale and you have to adjust and you have to pivot along the way. And the momentum is strong. and so we feel really good that it's going to keep growing. In fact, in the second quarter, we shipped more pumps through Pago than we did all of last year in our old pharmacy model. and so it's moving in a really good direction and when you take away that cost for patients it's easier to bring new patients onto the technology so we just have to get through some of these early learnings and really start driving that awareness with HCPs and the patients that this opportunity exists and so when we thought about second quarter we built in a pretty hefty step up in terms of percentage that we would expect to go through pharmacy and a really high exit rate as well so We haven't given any specific details on what those numbers are, but it will continue to step up meaningfully each quarter. And we feel very convicted in the ability to achieve that.

Understood. Thanks.

Thank you. And our next question comes from the line of Karen Ryan from Deutsche Bank. Your question, please.

Hi there. Thanks for taking my question. I just wanted to check in on how you're tracking on converting users over to pharmacy at renewal. If you want to maybe talk about some of the patterns and trends you're seeing there and how that compares to some of the other pharmacy growth opportunities and new starts or in warranty conversions, which I think are kind of the most attractive for you since they don't come with the pump headwind. Thanks.

Sure. We haven't really spoken to any particular details about the sources where pharmacy is driving the most opportunity. But as you point out, I'll go through a couple of just pieces of information. For new starts, it's very attractive. Many of those folks who are coming from MDI have never moved to pump therapy because of the cost. So it's something that it makes it easier to have those conversations about what the products offer because they don't have to worry about the cost burden in mind as much. For renewal customers, where it can help when they're out of warranty, would really be that they don't have to wait as long. Sometimes they go through that same cycle where they don't want to make that next purchase, their pump's still working fine, but this helps them be able to move forward more quickly with a renewal and or a switch if they were on T-SUM and they want to move to MOBI, it gives them that opportunity. We don't particularly focus on shifting our own in warranty customers over, but it does make it easier for patients who want to convert from other technologies that may be in a contract to shift to our product in the pharmacy channel. So there are many ways where we can drive this penetration with pharmacy that will contribute to us achieving that 20% target that we've set out for the year.

Thank you. And our next question comes from the line of Jason Bedford from Raymond James. Your question, please.

Hi, this is Elena. I'm for Jason. Thanks for taking my question. I was wondering, can you share some more color on how your conversations with payers have evolved since introducing PAYGO? You mentioned seeing a higher price than your initial expectation, which sounds interesting. Could you maybe share a little about what might be driving this, and do you see an opportunity for a higher price in the future? Thank you.

Sure. So, from the payer perspective, I would say we've already have contracts with the top three PBMs so we have really great coverage there and basically anyone else that's left we pretty much are talking to them and we're at different points or stages in our negotiation and so it's going very well the new model is making a big difference in terms of getting that formulary coverage versus the model that we had last year so we're going to continue to pursue that and as we look ahead it will become more about protecting and defending what we have and continuing to drive preferred access in cases where we don't have that today. The pricing, so we had set out, I'm going to say a modeling assumption for people to start at $350 per month per patient. The contracts that we have have varying levels of rebate associated with them. And also an unknown for us is what level of copay assistance that patients might actually utilize. And so we factored in conservatively that we could do at least $350 a month We did indeed do better than that in the second quarter, but I would dare say we don't have a sustainable trend necessarily to say this is the new number that it will be. So we want to monitor this over the next couple of quarters and see where it starts to shake out on a regular basis, and then we can talk more about what that looks like in the future. I think it's fair to say that we have our eyes set on a higher number down the road, as we see in the market that Competitively, others speak to higher price points, and so we look forward to driving towards that number ourselves.

Thank you. And our next question comes from the line of Anthony Petrone from Mizzou. Your question, please.

Hey. Hello. Good night. This is Dimitri Dallon for Anthony. Hey, guys. Congrats on the printouts. You know, it's pretty good across most sectors, but it looked like International Supplies was maybe a little weaker than expected and I don't know if you can provide any color or what happened there in the quarter and maybe if anything we should be thinking about looking at the rest of the year. And maybe a quick follow-up. We all look forward to movie Toodless and I feel like we haven't heard much about CIGI lately, and I don't know if we can get an update around that. Thanks.

I'll start with the supplies question internationally. So we have been, I would say, on our worldwide business managing through supply chain constraints with infusion sets that come from a third party. It's something that began late last year but became more impactful here in the first half of 2026. We believe the greatest impact was in the second quarter. And for us, that was the primary reason that we saw softness in supply sales in the second quarter. We did receive the level of inventory or allocation that we expected to get in the second quarter. So we can say that we believe we're on track with our supplier with what we should get this year. It just came so late in the quarter, we weren't able to turn it around and get it into distributors' hands before we closed the quarter. So it's really more of a timing element there. And again, we do think second quarter had the greatest impact. will still see some impact in the next couple of quarters, but it will lessen across the year. And at this point, we feel like we're managing well through the situation and we still feel confident in achieving our guidance for the year.

And then relative to CIGI, I would say that we have taken their technology resources from Switzerland and brought them here to San Diego. And now we are working on, I would say, the next generation MOBI. The next generation Mobi will incorporate the CIGI technology and also some of the Mobi technology. And that's going to come to market in a while. I would say that right now our focus really is to get Mobi tubeless to the market. And we think that Mobi tubeless is going to have a meaningful life on the order of two to three years. And in that timeframe, we'll continue to work on the next generation Mobi, which as I said, will include the technology that we purchased from from CIGI, and we think that'll be a great next product, but it's not going to be in the market for a little while. Okay, thanks, guys.

Thank you, and our next question comes from the line of Travis Deed from Bank of America. Your question, please.

Hi, this is Grace Sean for Travis. Congrats on filing Toby and being on track for the launch. Just wanted to ask how we should think about The launch, ramping, and uptake into 2027 with other competitors coming to market potentially end of this year and early next year with their patch pumps and maybe any preliminary thoughts on market growth in the U.S. in 2027 and how these patches can accelerate growth.

Right. I think when you look at the market today, there's a tube space and a tubeless space. And if you look at the market growth rate in the tube space, it's and many more. And so, you know, we think getting into that market with a tube product is going to give us access to a significantly higher interest level and it's going to drive meaningful growth to the point where I think this will be an inflection point in our revenue curve when it's on the market and fully released. I think, as I said, there's still uncertainty from the FDA and we've got to get through our launch processes. But I would say that we do expect to have the product on the market in the second half of this year. I would say that 2027 is really going to be a full year where we have the product in the market. I do believe it will compete effectively against all of the existing and devices that are near release as well. And I can say that we've done that through a number of marketing panels where we basically just spent a lot of time understanding what people like about what's on the market as well as tubeless MOBI. And then at the ADA, we did a number of, we had a number of seminars or sessions with physicians where we actually sat them down in the room and we showed them the product. We showed them how we needed is to transition from a tube to a tubeless device. And I have to say that the response was just overwhelmingly positive. So, you know, we think Movi tubeless is going to be a very important device for us. It'll start this year, but I think 2027 will be the year where we really see the positive impact on not only on revenue, but on margin.

Thank you. And our next question comes from the line of John Black from Stifel. Your question, please.

Great, guys. Thanks. Good afternoon. I'm just curious, Leigh, roughly how much higher has pharmacy been running above that initial $350 per month assumption and maybe what that does or doesn't say about the number of people transitioning to pharmacy for supplies? In other words, if it is running decently above, I think that would imply that the number of conversions is running a little bit behind plan, if I've got that correct, and any thoughts why that would be the case.

Yeah, great question. I'm not going to speak to the difference that we saw in price versus the modeling assumption we had put out specifically. Other than your point is accurate that some of that pricing benefit was part of the reason for the overachievement in the quarter. What we did see in this early adoption phase, and this is really as There's a lot of things to work on as the volumes are coming through pharmacy. There was a little bit more of a focus on getting the Pago pumps out the door. So thinking about bringing those new patients into the family who really want a pump. And for patients who are already ordering supplies from us through DME who are happy customers, no rush to push them through. a lot of it's a balancing act because all of this takes physicians time to write new prescriptions and so as we get the workflows going and the efficiencies driving we'll continue to push on those conversions of existing customers so the pump adoption slightly outpaced I would call the patient conversion or adoption that you have there on the supply side and we expect that may continue into the third quarter but that it will really start to change as we get into the fourth quarter and going into next year when we have that Co-pay Assistants to help people, especially when they usually meet those deductible resets in the first quarter.

Perfect. Thank you.

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our next question comes to the line of Dane Reinhart from R&W Baird. Your question, please.

Hey, John Lee. Thanks for the time and questions here. Just one quick one. I mean, it's been a few quarters now since you've kind of had that type two label expansion. I think you're a few quarters in now as well to really pushing with your sales force and having them go on kind of the full offense there. So just any indications of maybe what percentage of your new starts are type two right now and just what you're seeing in that underlying market from an overall growth perspective. Thanks. Yeah, thanks, Dean.

You know, I think we've chosen to stay away from actually giving specific numbers about how we're doing. And I think what we really want investors to focus on is the broader indications for adoption. And I will say that, you know, you're right. We have really, this year, last year was kind of piloting to understand how. This year, you know, we've really worked with the sales force, you know, in terms of they have objectives in terms of, you know, of type two sales, et cetera. And, you know, and as I said, when you look at these indicators, they're all moving in a positive direction and we think that's gonna drive growth over time. And I mentioned the C-peptide decision. We expect that's going to be made this month. We expect it to be positive. We don't really know how that implementation will occur, but I think any steps in a positive direction will be good for people with type two. And then we also have a number of structural things, like we have pre-style library three, which we know is, Thank you. This does conclude the question and answer session as well as today's program.

Thank you ladies and gentlemen for your participation in today's conference. You may now disconnect. Good day.