Good morning, everyone. We'll go ahead and get started here. Just to make a quick housekeeping announcement that presentations are not open to members of the press. With that, I'm very pleased to welcome Ana Maria Chadwick, Executive Vice President and Chief Financial Officer for Insulet. As with all these sessions, if there are questions, feel free to raise your hand, and we'll get a mic over to you so that people participating in the webcast can hear as well. Maybe we'll start with, I think this is very topical, is the leadership transition. I think the timing is probably mostly what surprised people, but maybe now you've had a little bit of time to kind of reflect on the transition in leadership. Maybe give us latest thinking, help investors recontextualize the move and how things are going.
Great. We welcomed Ashley about six weeks ago, and we're very excited. There is never a better time to make a change than from a position of strength. The board made an assessment, and it says that what took the company from one to two billion, the skills, are slightly different than what it is going to take to go from two billion plus. The scale, leading at large scale, Ashley has from Johnson & Johnson, and her consumer medtech intersection are going to be really, really valuable. We are very excited to welcome her, and so far, everything is going really well.
Excellent. I think with her appointment, there was obviously the second- quarter earnings call, and there also was a small sell on the day of her announced move into the CEO role. One of the things, at least, that struck me in appreciating that we're newer to the story is the focus on globalization. Maybe as we thought about Insulet, there's obviously still remaining opportunity in the type one. Type two is blue ocean, and then obviously globalization represents a big opportunity. Was that a signal to us that sort of the priorities are rescaling with globalization moving up and type two's moving down? How should we kind of think about the general prioritization of growth?
That's great. Our priorities remain intact. We will continue to work through them, but just to recap, our priorities are type one, type two in the U.S., huge markets, both of them. Type two, as you mentioned, even bigger. Type one international, another 3.5 million people in the markets we serve, only 20% penetrated. A lot more to do. We'll keep advancing our platform, so priorities remain intact.
Okay. It's interesting, both you and Ashley come from different types of industries. Obviously, she's in medtech, but both come from more diversified businesses that are arguably slower growth profiles in their end markets and in respective companies. How are you kind of thinking about that? You've been here a year or so transitioning and navigating to running a pure- play growth company.
Yeah. Listen, I will tell you, it starts with the word fun. It's really a lot of fun to be in a fast- growing, dynamic, innovative company such as Insulet. The other thing I'll say, and I'll speak from my background, I came primarily banking and other industries where, through a third party, you enable something at the end. The one thing that I love is just seeing the direct impact we have with our end customers and helping people with diabetes.
You've been in the role a little over a year now. Maybe just talk to us about what your priorities are and how you see those kind of evolving over the next six to twelve months.
Yeah. The priorities for Insulet and for finance inside of Insulet are really in three main areas. We're here to help the people with diabetes, so that innovation roadmap is incredibly important. Second is the markets that we serve and the expansion. We talked about US type one, type two international, all of that. Third is really about the people. At the end of the day, it's the people and the culture of the company, and we have a really good one, and we want to keep it that way.
As you get bigger, how do you ensure that you maintain that growth agility while trying to manage more systems, more processes, more countries, et cetera?
Yes. It's a really good challenge. We're a 25-year-old young company. I would say many companies, when you think about making a change, they have to make a change to their old systems and then build a new. Here, we're more on the building the new. I think what Ashley and I bring to the organization is we've seen some of these large systems operate, so we want to design them to the better way so that they can have that agility and flexibility as we move forward.
Maybe we could just toggle over to the business here. One of the questions that we get from investors pretty frequently on the type two opportunity is you have had the indication since August of last year. You've seen a very nice pickup, but how do we evaluate whether what we're seeing is just like this is the new thing and it's going to roll over after kind of a 12-month period? There are sort of type twos that are very addressable with pumps beyond the MDIs, and that's just kind of like a flash in the pan. What are some of the things? How would you respond to that? What are some of the KPIs that you're monitoring to give you confidence in the outlook?
I'll start by saying it's a huge market. Two and a half million people in the U.S., only let's call it 5% penetrated. It's a huge market. We have the winning product that overtook type one to bring people from MDI. We feel very good and confident with that. In terms of proof points, we look at a few things. Of course, new customer starts, but that's almost like an output, right? We look at our sales force and the coverage that we have. We've talked about the fact that we expanded our sales force. In that expansion, before the expansion, we covered about 30% of the two and a half million people being feet on the street. Now with the expansion, we cover about 40%. The efficiency of our direct-to-consumer advertising is getting better.
We're seeing that as we get inside sales calls and in those conversions. The third thing that I would note is we also talked about the number of unique prescribers. That number grew to 25,000 in the US. That was a 20% growth from a year ago. We feel those proof points are out there, and we're making good in that trajectory. We want to see more of that before we lean in any stronger, whether it's with our guidance or with other investments that we'll be putting out there to capitalize on this huge opportunity.
When you say cover 30%, now 40% of that population, how is that defined?
Yes. We have made an assessment as to where the two and a half million people, what doctors are serving those. What is very obvious is the type 1 population is mainly seen at endos. There is a piece of that two and a half million that also gets seen at endos. By reverse, there is a piece that gets seen at primary care physicians, both smaller amount of type 1s, bigger amount of type 2s. As we expand in those PCPs, we look for two key indicators. We look for high prescription of CGMs and high prescriptions of rapid- acting insulin. When you have those, that is the pecking order that we start prioritizing in that sales force expansion, and that is where you tend to find those patients.
One of the other things that we've tried to figure out on the type twos is of the two and a half million, what's the serviceable population? Because one of the other dynamics, I think, with the type two that is unique from the type ones is the socioeconomic and demographic dynamics at play. How does that factor into the analysis of where to put feet on the street?
Yeah, it's a very interesting question. I'll bring back for a second to our security to these studies where we had a wide range of social demographic classes. The good thing is that it does prove that the ease of use and all of the attributes that our product has serves across the board. It becomes an economic question. We have some statistics that I just want to share here is our product from an out-of-pocket to that end customer in the United States; the vast majority pays about $30 a month. It's about a dollar a day. Now, again, that could be difficult affordability for some, understood. There's about a third that pays no copay, nothing. We continue to work through our health plans, through the PBMs and everything, to make this more affordable.
The last thing that I'll mention is, and we try to be selective on this, but we do have copay programs. We try to make that be as reachable as possible.
Okay. That's very helpful. I think when you talk about kind of measuring success of some of these investments before going further, how long a measurement period is that normally? What would you consider to be success?
Yes. So we have a very disciplined approach, whether it's direct-to-consumer, whether it's our sampling program. In terms of expectations, we have number of clicks, number of reach, number of conversions, so on and so forth. We look at all of those things. We try to give it, I mean, by the time the customer expresses an interest all the way to being trained and put on product, there's a little bit of a lag there. I would say, I mean, there's no perfect formula. Each program might be different, but a good six months or so. Some of them, we also want to see that retention and make sure that that's also there. There are phases of measurements that we have.
Yeah. It's interesting that you bring up retention because this is another question we get very frequently. I would say more on the MDI side than on the pump side with respect to the type twos. There is a question out there about will you see as durable utilization and retention with that population as you see more obviously with the type ones? What have you observed so far?
Yeah. Great question. We walked in understanding these populations will behave differently. There's a lot of road the CGMs have paved in helping us learn and understand that. What we're seeing right now is pretty much in line with what we were expecting. To be clear, I mean, we are anticipating the type one and the type two to behave differently.
What were you expecting?
It's early days, but we are expecting, and we don't share the specific numbers, but we expect there to be higher attrition in the type two. We expect utilization to at times be a little more spotty because the pancreatic function of a type two still has some insulin production and so on. At the end, what has been proven through our studies is that people who stay on product actually stay in range longer and have the desired outcomes that the healthcare system wants, which is the prevention of hospitalizations, the remaining organs to be functioning better over the long term. It's a lot of education and a lot of market development we need.
I have to push a little, but can you give us how about any sense on magnitude of difference in utilization or retention between the type ones and type twos? Is this material differences? Any scaling or framing that you could provide would be helpful.
Again, it's early days. This is part of the data that we're collecting. When you look at the type 2 growth that we're having, we're still in the early time. Once we get a little bit more, we'll be out there sharing.
Okay. So that is data that you will at some point.
We will. I think it's important, and we know they're different, and we're just in the process of education.
Okay. Too early to tell would be a fair way to conclude that. Okay. And what are some of the things that you're doing to maximize retention in the type twos?
That's great. Listen, today, I hope you saw the press release. It hit a few minutes ago.
This morning, yeah.
Yeah. iOS G7 is out in full market release. That follows our iOS for G6 full market release that happened in the fourth quarter. Those are examples of ways we want to drive that retention. We want to make it ease of use for our customers. There's a customs food feature in which you can say, "I'm eating similar to what I ate before— small, medium, large," those types of things. We want to do all of those things. We actually want to be proactive when we see somebody come off our product for a period of time, reach out to them, understand what's happening. Is it a payment problem? Can we give you a copay card? We want to really help the people out there. There are efforts, and we'll continue to assess and intensify them.
Okay. Maybe just sort of moving over to the financials and the business performance here. Q1 saw quite a bit of upside. And given kind of the recurring nature of the business, or once again, the patients, they presumably continue to use the product. Is it right to think about the guidance rates for the years flowing through the Q1 upside?
Yeah. That's exactly what we did. What we did is we let the upside of Q1 drop through, and also the new customer starts that we saw, we let that drop through. What we talked about is we set guidance with the full intent to hit it. We want to see more proof points. I mean, we're only in the first quarter. We're really only two quarters into type 2 as well. We had great performance in international, but we'll lean in heavier as the year progresses here, but we just wanted to see a bit more proof points.
Effectively looking at that another way, your assumptions that you had previously in guidance for 2Q to 4Q on new patient starts and other metrics not related to the Q1 flow through were unchanged.
Correct.
Okay. Maybe we could just break that down a little bit into just the different operating regions. For the U.S., your guidance does seem to imply a pretty significant slowdown from first half to second half. What are some of the factors that influence that?
Yes. As I said, it's really about seeing a bit more proof points. We do feel we have a lot of tailwinds here and it's just early in the year.
Anything around rebates or other kind of one-off factors that we need to consider either quarterly phasing or that may have influenced Q1?
Yes. Q1 had two dynamics that need to be taken into account that made the quarter look even more favorable. You have to adjust for the stocking dynamic from first quarter of 2024 associated with the implementation of our SAP system. That was very well vetted and talked about. The second one, which is a bit newer that I indicated during the first earnings call, was we did see 450 basis points of a headwind in the first quarter of 2025 compared to 2024 related to an estimation change we made for estimating rebates. This is specific to the U.S. Now we are estimating rebates on a weighted average rebate rate for the full year, very similar to what the industry does, instead of before, where we were waiting to receive information from the PBM. It is just a better estimation.
Hopefully what that will do is it will give you more clarity of our volume drivers instead of having that price in the middle. The last thing that I want to mention, it's neutral to the year in our guidance. Those 450 basis points that we saw in the first quarter will come back radically over the next three quarters.
Mechanically, rebates always become a little tricky. Rebates: this is the difference between gross to net on pricing, basically.
Pretty much, yeah.
Should we then think about your volume growth and revenue growth being roughly equal going forward? Is that the idea, to try to smooth out the difference between new patient starts and overall utilization growth with revenue?
Correct. I mean, it's really taking out some noise that was not intended to be there.
Okay. Got it. Maybe we can talk internationally. That is picking up momentum for you. Maybe just sort of take a step back and just sort of frame the OUS strategy. If I look at the number of—why don't you start there, then I'll follow up with some other questions.
Listen, we're super excited with our international. The overall growth of insulin and the international growth has been amazing. We grew 36% in the first quarter, which indicates a few things, and I'll touch on them in a second here. When you think of the international growth, I think about it in three ways. First is new markets where we're launching Omnipod 5. After we launch in the new markets, then you have a lot of cultivation and things like that. We also have had further releases of sensors as well. You launch in the new market, you put out there sensors and other things into those markets. The third thing is we then look out and say, "Are there more markets we should be?" When you look at the history of our international, it started with U.K. and Germany about two years ago.
U.K. and Germany are still growing. It's very durable growth, but we put out more sensors, and then we actually international on average is only 20% penetrated. We are the most prescribed amongst new to pump across Europe. You get to the next layer here. We went with France and Netherlands kind of summer of last year. That is also going through that same growth. Because of our reoccurring revenue model, this growth kind of overlap. Early this year, we launched in nine more markets, which together are about the size of the U.K. and Germany. We have later on this year or early next year; we haven't announced exact timing. We have that in the Middle East.
When you put all of that together, you can see here kind of those layers of durable growth into the future. We're very excited by our international agenda.
International, it gets harder, right? You make the comment that the nine countries represent the size of the U.K. and Germany combined. Are you going direct in all those markets? What is the commercial strategy?
Yes. We launched in some of our direct markets first, some of the larger markets where we see that bigger opportunity. A lot of the markets we launched here in the first quarter are indirect markets, so distributor markets. I do want to call out, it's important, thanks for the reminder, that about 5%-6% of our growth that I mentioned here in the first quarter, so we grew 36%, represents the distributors filling up their distribution networks. Meaning, think about that as kind of non-reoccurring. There could be some more of that happening as their different markets launch at different times. There is an element of filling their distribution networks as well.
Okay. And that's contemplated in the guidance for the balance of the year. Sustaining 30%, this big number internationally, even when you adjust for the stocking dynamic, continuing that or sustaining that requires both same sort of same- country growth and adding new countries. What's the breakdown of sort of same- country growth versus the criticality of adding new markets?
Yeah. For 2025, we've been pretty clear in terms of the countries that we're in, and it's really expanding that offering now, remaining to the Middle East, whether it might happen late this year or early next year. As you look into the out years, and we haven't been specific, in our journey map, there will be getting into more countries as well. Now, keep in mind, on average, 20% penetrated. So there's still a lot of room and opportunity, and our market access team is constantly working on securing more funding for the asset class and those different types of things, as that penetration does anticipate further growth.
Okay. How do you think about qualifying markets? Do you wait to have visibility into reimbursement? You would think Australia, New Zealand, Japan represent big populations, but what is sort of the qualification process for identifying which markets you want to go to?
Yeah. So it's exactly what you mentioned, right? We need to make sure there's good CGM presence. That actually tells us two things. That tells us that there's a lot of people with diabetes as well as it tells us that there's reimbursement in those markets. Of course, we look at data on rapid- acting insulin and those types of things. Once you put all of that together, we have a sequence in which markets we will go to. Of course, then it's a question: do we go direct, or do we go through distributors? All of that is part of that roadmap. Keep in mind, we're only in 25 markets today.
Okay. Maybe just sort of wrapping the top line discussion together just to make sure we're kind of pulling together what you're saying and that I've kind of captured it accurately. First quarter, very happy with performance. There were some factors in there that helped overall results, positive being the potential inventory stocking for some of those distributors. It sounds like the rebate dynamic was actually a negative, though. You have some headwinds and tailwinds in there. For the rest of the year, in a scenario where some of the type 2 dynamics persisted from Q1, you would see upside relative to your guidance. In a scenario where you saw moderation, you would hit your guidance.
You've hit it on the nail. Absolutely.
Okay. I just want to clarify something you said because someone in here on the webcast is going to message me and say, "Ana said the goal is to hit the guidance." Of course, is the goal to hit the guidance or exceed the guidance?
I would say it's both. I mean, we set it with our best available information and the intention to hit. You've seen our history, and we intend that to continue.
Okay. Excellent. Maybe we could toggle over to the P&L here. I mean, the gross margin trajectory of the business has been pretty extraordinary and bridging over 70% gross margin. You did take up your outlook for the year. Maybe help us understand what are the factors contributing to the incremental gross margin performance.
No, it's great. We're super excited. First quarter gross margin: 71.9%. Team's really doing a phenomenal job. A couple of the things that are going really well for us is getting those efficiencies. The scale that we have, the production of tens and millions, and the growth we've had give us a lot of room for our supplier negotiations. Those have done incredibly well. The other thing I would say is the team's operating; whether you call it levels of scrap, the efficiencies that we're attaining are world-class. There will always be variability amongst the quarters. Just let's be clear. It's just the nature of the business, but they really had a phenomenal first quarter. The other thing to mention is we've been working a lot around tariffs, of course.
We talked about at the time when we gave our earnings result in early May; with the information we had at that moment, we estimated the tariff impact to be small, to be about 50 basis points for the full year. Because of the strength we're seeing in our manufacturing operations, we leaned in and actually guidance to 71% and absorbed those 50 basis points of the tariff.
Do we have tariffs or not?
Depends on which day you're in the news. In addition to that, insulin as others in the industry do benefit from some of the tariff exemptions that are out there. Overall, our impact would be smaller. Based on the day, we will continue to update you guys as we learn more.
Where was, just remind us, the majority of that 50 basis point impact coming from?
It's mainly coming from China, and in some elements there, also some of our component parts that make manufacturing over in Akron. The component parts there.
Raw materials.
Raw materials.
Raw materials. Okay. At the same time, while you did raise gross margin guidance, you kept the 16.5% operating margin target in place. Help us think through where some of those incremental investments are going.
Right. I'll start with 16.5% operating margin, which is a growth of 160 basis points from prior year. We are committed to margin expansion of at least 100 basis points a year. What we want to do is take a moment and look at our investments, mainly around our commercial efforts. We believe we're uniquely positioned both in the U.S. and in international to relook and lean in to see if there's anything we can do to actually go faster within the same framework of our investment philosophy. That's all we're doing. We are working hard to make sure we can capitalize on this huge opportunity ahead of us.
When you kind of made the decision to sort of reinvest some of the upside, how long does it take to sort of open up budgets, open hiring? You obviously have to open more headcount, go through that process. How long does it take to really execute on an expanded budget offering?
Yes, you described exactly some of the mechanics that need to happen. It depends on how it gets deployed. Usually, if it's direct to consumer, the spending of that can happen a little bit faster. There's a lag to seeing the impact. There's a cultivation period and all of those things. I would say if you do sales force expansion, which we just did once, so we're not announcing anything or anything like that, that takes a bit longer because you have to hire people. There's also sampling because of our unique form factor that we have. We can do sampling at doctors' offices, and we've seen some really interesting returns out of that. Some of them are faster, some are a little slower, but I just gave you a little bit of a flavor between some of the alternatives.
Okay. I know we're coming up on ADA. Maybe give us a preview of what investors should be looking for and what sessions of interest or data —anything that you want to highlight going into the conference.
Great. Yeah, we're only a few weeks away. We're going to be sharing more information about subsets of our security 2D data that we showcased last year. There's a lot more learnings and things we've analyzed with that data. Earlier this year, we were at ATTD, and we shared results of our radiance study. Again, we've been able to go deeper into that analysis. You'll be hearing a lot more from those areas of studies as we continue to build the clinical evidence for further progression of our algorithms and other things that we're working on.
Okay. Lastly, you did take some steps on the capital structure here to term out some convertible debt and then upsize and put some more debt on the balance sheet. What was the intention there and how do you plan to use this increased financial flexibility?
Right. Excellent. Listen, we're very excited by having that increased financial flexibility and doing it at a reduced weighted average cost of capital. That's really the intent here. We are uniquely positioned versus others in the market, generating our own free cash flow. That gives us the ability to create a balance sheet that looks more like a grown-up balance sheet and also helps us have that flexibility, as you said, into the future.
Would you contextualize that in the same vein of some of the future trajectory of insulin, the leadership changes we talked about earlier? This is all about not maturing. I do not think anyone wants to use the word maturing, but in moving insulin from the $1 billion to $2 billion company, I think you have talked about $2 billion-$6 billion as the potential opportunity.
Agreed. I mean, this is really around being more mature. We're 25 years young, and we now produce the balance sheet, the free cash flow to sustain ourselves. That's where we are in that journey. We're very excited by the position that we're in. The markets have been open for us. We had great transactions in the market, and we're very excited.
We should not view it as your leading indicator on M&A or other. This is really allowing you to continue to run the playbook.
Correct. Allowing us to continue to reinvest in ourselves. That is where we see the best returns, having that flexibility in the balance sheet. Those are really the key priorities.
I guess we'll close with the analyst meeting. I mean, I think everyone understands that three months after someone joins the company, it doesn't make a ton of sense to host an analyst meeting. It doesn't allow that individual to have ownership over it. It probably takes that long to prepare for the meeting, if not longer, based on what I can imagine your internal teams are doing. When do you think we'll have an analyst meeting back on the calendar and just want to make sure this is a delay, not sort of permanent deferral?
Correct. It's just a delay. We're working hard to align calendars to not only for Ashley to have time to do all the listening tours and all the things she's working on to put her stamp into the strategy. I do want to reiterate, nothing has changed in terms of our strategy. More to come. We're working calendars. We look to see if we can squeeze anything this year. I'm not too sure. Maybe, if not towards the early part of next year. It is really a postponement. It's not a permanent deferral or anything like that.
Excellent. I think with that, we're almost out of time. Maybe I'll turn it back to you for any kind of closing thoughts or remarks and then wrap up.
Great. Thank you, David. It's been wonderful. Thank you all for participating and for your interest in Insulet. I firmly believe Insulet is uniquely positioned in a category of one with a product that overtook type one to be out there to really capitalize on the US type two market and the global market opportunities. We're very excited with our innovation journey and the roadmap ahead, the free cash flow production that we have, and the sustainability of Insulet into the future, and ultimately helping the millions of people with diabetes out there. Thank you very much and thanks for your interest.
Excellent. Thank you, Ana.
Thank you.