Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

Thank you, Dalam. Good afternoon and thank you for joining us for Insulet's fourth quarter 2021 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer; and Wayde McMillan, Executive Vice President and Chief Financial Officer. Bret Christensen, our Executive Vice President and Chief Commercial Officer is also with us today for the Q&A portion of our call. Both, the replay of this call and the press release discussing our 2021 fourth quarter results and 2022 guidance will be available on the Investor Relations section of our website. Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and could materially differ from current expectations. Please refer to the cautionary statements in our SEC filings for a detailed explanation of the inherent limitations of such statements.

Thanks, Deb. Good afternoon, everyone and thank you for joining us. Our fourth quarter results mark the end of another year of strong growth, successful execution across our strategic imperatives and advancement of our mission to improve the lives of people with diabetes around the world. In 2021, we increased awareness and adoption of Omnipod in both the Type 1 and Type 2 markets, continued to unlock access through the U.S. pharmacy channel, expanded internationally and strengthened our global manufacturing operations. That momentum has continued into 2022 with the recent FDA clearance of Omnipod 5, which we could not be more excited about. While 2021 was a strong year, it certainly wasn't without its challenges, including the ongoing impact of the pandemic, global supply chain shortages and growing AID competition, particularly in our international markets. It is wonderful to see the global diabetes community embrace automated insulin delivery technology, and it is a clear indicator of how well received we believe Omnipod 5 will be. We are making great progress with our commercial rollout in the U.S. and advancing our efforts to bring Omnipod 5 to our international markets. The consistent strategic progress we have made is reflected in our financial results. In 2021, we surpassed $1 billion in annual revenue, in line with the goal we provided in 2016 as part of our long-range plan. 2021 also marked our sixth consecutive year of 20% or more revenue growth and we now serve approximately 300,000 global customers using Omnipod. We are already off to a terrific start in 2022 with a critical milestone. The FDA clearance and commercial launch of Omnipod 5, the first tubeless automated insulin delivery system that offers full compatible smartphone control and an advanced algorithm residing on the Pod. It has taken incredible effort and commitment by the Insulet team to reach this groundbreaking achievement. Omnipod 5 marks the greatest and most complex innovation Insulet has brought to market in our company's 20-year history. It offers unmatched innovation with a patient-preferred form factor and it strengthens the value we provide customers today through our pay-as-you-go business model and U.S. pharmacy access. These distinctive benefits should provide us with unique competitive advantages in the market and will deliver life-changing technology to our customers. Taking a step back, diabetes is a growing epidemic and the global markets remain critically underserved with low pump utilization. However, people with diabetes are adopting wearable technology at an increasing rate as CGM use and awareness accelerates. Our efforts to improve access to and awareness of Omnipod along with our customer-centric approach to innovation are driving continued Omnipod adoption. In the U.S., we continue to capture over 80% of our new customers from multiple daily injection and we remain a leader in the Type 2 market based on our form factor, the simplicity of our technology, demonstrated outcomes and broad affordable access through the pharmacy. Type 2 continues to represent between 35% and 40% of our new customers in the U.S. These trends offer significant growth opportunities for Insulet over the long term, given Omnipod's differentiated benefits, as well as our relentless focus on delivering a great customer experience. We expect to continue to drive Omnipod penetration, expand our total addressable market and grow our global market share. I will now provide an update on our strategic imperatives, which include expanding access and awareness, delivering consumer-focused innovation, growing our global addressable market and driving operational excellence. Expanding access to and awareness of Omnipod is essential to our strategy. Today for more people than ever Omnipod is available through our pay-as-you-go model in the U.S. pharmacy channel. The pharmacy provides easier access and lower costs for the majority of our customers. Payers and Omnipod users are not burdened with a four-year lock-in period. New technologies like Omnipod 5 can be adopted without upgrade or upfront fees and supplies can be picked up conveniently from a nearby pharmacy. For the payer, this means we assumed the risk through our pay-as-you-go business model, and for the Omnipod user it means easier access and affordability. The enhanced experience in the pharmacy is great and is exactly why we are investing to expand access here. The primary driver of our growth over the last two years has been Omnipod DASH, and we have successfully secured broad access to this innovation globally. Almost all of our new customers in 2021 started on Omnipod DASH, and in the U.S., we've now secured almost 90% of covered lives for this product primarily in the pharmacy. Essential to access is affordability. The vast majority of our U.S. consumers pay less than $50 each month for Omnipod DASH through the pharmacy, and the average is far less with many customers paying nothing. While the cost to users of Omnipod DASH is on par with multiple daily injections, Omnipod provides improved outcomes and quality of life. We continue to look for ways to reduce cost and the logistical and administrative hurdles for all customers, so they can access and afford Omnipod. Our efforts to raise awareness through our direct-to-consumer advertising campaigns are also helping to drive adoption. Our programs across the U.S. and select international markets are ramping and continue to drive a positive response and contribute to our customer growth. In 2022, we planned to expand our DTC efforts to drive increased awareness of Omnipod DASH and now Omnipod 5. Given our success to date, we are excited to see the impact our DTC campaign will have once Omnipod 5 is fully launched. Delivering the best customer experience is at the heart of what we do. For 15 years, we've been using our unique form factor to simplify diabetes management. Omnipod 5 takes our innovation to the next level. It is the world's first phone controlled Pod based AID system, and we are confident it will build on our history of improving diabetes management as we leapfrog all other AIG systems on the market. Full phone control is far beyond what others in the market have been working on. With full phone control, there is no separate controller and there is no traditional pump. The entire experience is on-body and on phone. No tubes and no pulling out the pump to dismiss an alarm, change pump settings or prime an infusion set. Full phone control is the next level of simplicity and sophistication, and it is an experience that is only possible with a true wearable form factor like Omnipod. We've redefined the category of insulin delivery. In addition to being the first tubeless fully smartphone controlled AID system, Omnipod 5 includes customizable set points, our smart adjust algorithm on the pod and a novel bolus calculator. This level of innovation required unusually complex regulatory submission, including three 510(K)s, three lead reviewers at the agency and thousands of pages of data. Our limited market release has already begun and the early customers are over the moon. Limited market releases are best practiced with launches of major new innovations and ours is designed to test our customer training and support system, build access and ensure the best possible customer experience upon full market release. In addition to product innovation, we have also transformed how users access Omnipod through the pharmacy. Customers can now enjoy a simple onboarding process and a modernized customer service platform. We can verify pharmacy benefits in seconds, streamline complex paperwork requests, enable our field teams to manage their pipelines more efficiently and facilitate a 100% digital pathway to access our products. During 2021, our market access teams contracted strong coverage for Omnipod 5 prior to FDA clearance. And we are now able to move more swiftly to expand coverage further as many payors waited for clearance to establish coverage policy. We expect to be in limited release for three to nine months and are excited to roll out our system more broadly as the year progresses. We can't wait for everyone to experience the simplicity and improved outcomes enjoyed by our clinical study participants. Omnipod 5 is the most anticipated innovation within the diabetes community and our team is laser-focused on ensuring the system is available to everyone. Shortly after clearance, we also delivered our FDA submission to expand Omnipod 5's indication down to age two. This is important as we know the tremendous benefits Omnipod 5 can provide this vulnerable population and their caregivers and we continue to plan for an expanded indication in 2022. We recently completed our Type 2 feasibility study and look forward to sharing results at the ATTV diabetes conference in April. We are proven to be a pioneer in the Type 2 space and expect continued strong adoption given the benefits of Omnipod DASH, our U.S. pharmacy channel access and now Omnipod 5. Even as we launch Omnipod 5, we continue to strategically invest in a robust product pipeline. Omnipod 5 is a platform that you'll see us advance in the coming years. Our iOS app development is making terrific progress as is our integration work with both DexCom's G7 and Abbott's FreeStyle Libre. Beyond Omnipod 5, we are focused in three areas. We are working on advancements that will grow our addressable market. We are developing next-generation AID technology and we are creating digital innovations and data products to make diabetes management easier for our podders. Over the last several years, we have built on and enriched our digital platform capabilities. With SIM cards in every Omnipod 5 controller and by better aggregating and analyzing user level data, we can further enhance the customer experience for all stakeholders. With these investments, we can improve outcomes, lessen the burden for both physicians and users by providing actionable insight and develop more advanced future product offerings. These innovations will serve as another driver to secure Omnipod as the user preferred brand and strengthen our digital health capabilities. We have a sharp focus on our growing intellectual property as we create innovative new technologies and build on our strong existing patent portfolio. In 2021, we filed more new patent applications than in any previous year. This will help ensure we are well positioned to deliver on our mission and provide differentiated and industry-leading innovation to people with diabetes for decades to come. This past year, we built upon our 2020 expansion efforts and the rollout of Omnipod DASH across our international markets through targeted geographic expansion. We entered the Asia Pacific region through our entry into Australia and also expanded into Turkey. These efforts broadened access to Omnipod and strengthened our foundation for future growth. We expect additional market expansion in 2022 in the Middle East. Our efforts to deliver Omnipod 5 to our international markets are underway. We are making great progress and I'm happy to share that we submitted for CE marking in Europe. AID adoption is accelerating, and while it presents near-term headwinds, increasing market acceptance, reimbursement pathways and awareness of these technologies bode well for Omnipod 5 once we launch in our international markets. We look forward to Omnipod 5 being the product of choice globally. Many additional people around the world would benefit from Omnipod and we are focused on bringing it to them over time. We are building our international teams and advancing our regulatory reimbursement and market development efforts. Diabetes is underserved everywhere in the world and entering new markets represents a critical long-term growth driver for Insulet. Investing in our manufacturing operations also remains a strategic priority as we build upon our established global capabilities and scale. We made great progress in 2021, including additional steps to strengthen our global manufacturing operations and to secure uninterrupted access to critical components creating a more resilient supply chain during these unprecedented times. We can produce tens of millions of Pods a year and are extremely well positioned despite the challenging supply chain environment. Our team continues to execute remarkably well successfully mitigating the impact on our business and on our customers. These efforts will support the full commercial release of Omnipod 5. The continued strong global demand we expect for Omnipod DASH and our growing innovation pipeline. Our growth plans in 2022 and the years ahead will not be constrained by capacity. In closing, we finished another strong year and are extremely excited about 2022. We expect to fully launch Omnipod 5 this year in the U.S. We are advancing our strategy to bring Omnipod 5 to our international markets and we have an exciting and robust innovation roadmap. Our success is due to our talented team and their unwavering commitment to our mission. We have built an amazing company and an award-winning culture. This past year, we were named a great place to work in both the U.S. and the UK, while also separately being recognized as one of the Best Workplaces for Women. This past December, Druker's Institute listed Insulet as one of the top managed companies of 2021 based on customer satisfaction, employee engagement, innovation, social responsibility, and financial strength. These recognitions, in part because they come directly from employee and customer feedback, are wonderful reminders of the power of our people and our positive impact on one another in our communities and on our mission to improve the lives of people with diabetes.

Thank you, Shacey. Our fourth quarter performance closed out another year of progress for Insulet on many fronts. Our focused investments and consistent execution of our strategic imperatives continue to strengthen our financial profile while driving meaningful value for all of our stakeholders. In the fourth quarter, we generated 26% revenue growth finishing above our guidance range with record U.S. and global Omnipod new customer starts. On a reported basis for total revenue, foreign currency was a 70 basis point headwind over the prior year. We delivered U.S. Omnipod revenue growth of 28% also exceeding our guidance range. The trend of record U.S. new customer starts continued through the fourth quarter, a primary reason for our strong U.S. revenue growth. Also contributing was our success driving volume growth through the pharmacy channel due to continued Omnipod DASH adoption. Omnipod DASH drove over 80% of our U.S. new customer starts and we increased pharmacy channel volume to almost 55% of our total U.S. volume. In Q4, International Omnipod revenue grew 6%, which was below our guidance range. Our growth was impacted by an estimated $5 million channel inventory reduction due to a European distributor returning to more normalized levels from the higher balance carried throughout much of the pandemic. This occurred sooner than anticipated and it was not fully factored into our guidance. It negatively impacted our Q4 growth rate by approximately 600 basis points. As a reminder, the majority of our revenue is sold through distributors in international regions, and fluctuations in inventory levels can impact our results. We also continue to be affected by increasing AID competition and the compounding impact of the pandemic on our annuity model. On a reported basis for international Omnipod, foreign currency was a 180 basis point headwind over the prior year. Our estimated global attrition and Pod utilization remained stable during Q4. Drug delivery revenue increased 113% during the fourth quarter finishing above our guidance range due to increased production volume driven by higher-than-expected demand from our partner. Gross margin was 69.3% in the fourth quarter, representing a 380 basis point increase or 370 basis points on a constant currency basis. The primary drivers were the mix benefit of growing volume through the U.S. pharmacy channel, product mix in our improved manufacturing operations. These drivers were partially offset by an expected higher mix of costs as we further ramp U.S. manufacturing. Our year-end inventory balance includes higher component costs as a result of inflationary pressure in 2021, and this is expected to continue in 2022. This will affect our gross margin in 2022 as we sell the product out of inventory. I will touch on that more in a few minutes. Operating expenses were in line with our expectations as we continue to strategically invest in our innovation pipeline, sales and marketing capabilities, global manufacturing operations and international expansion. These investments are designed to fuel sustainable long-term growth and expand our total addressable market while we further advance our mission. Operating margin was 16.2% and adjusted EBITDA margin was 23.7%. Both showed an increase over the prior year and were in line with our expectations as we grow profitably while also investing across our business for long-term growth. Turning to full year results, we delivered total Omnipod revenue growth of 19% and total company revenue growth of 20%, achieving another record year at $1.1 billion demonstrating the strength and durability of our annuity model. On a reported basis, foreign currency was favorable to 2021 total revenue by 180 basis points. In 2021, we achieved gross margin of 68.4%, up 400 basis points and in line with our expectations. We are benefiting from our growing scale and global manufacturing efficiencies and mix benefits from growing volume through the U.S. pharmacy channel and we also had lower one-time costs associated with the pandemic. These drivers were partially offset by expected higher costs as we further ramp U.S. manufacturing. Operating margin was 11.5% up 580 basis points and adjusted EBITDA margin was 19.6%, up 340 basis points. Both were a significant step up from prior year and consistent with our expectations. Turning to cash and liquidity, we ended the year with over $790 million in cash and the full $60 million available under our revolving credit facility. We entered 2022 in a strong financial position with a strategic roadmap to invest in critical areas of our business that will drive our innovation and growth for years to come. This past year, we took a series of steps to strengthen our capital structure and reduce our overall cost of capital. We are well positioned to finance our growth strategy. More recently in the current quarter, we finalized the strategic vertical integration acquisition of one of our suppliers, which brings key intellectual property and expertise in-house, allowing us to strengthen our competitive moat, production capabilities and efficiency and drive further operational excellence while mitigating supply chain risks. We have also taken additional steps to strengthen our global manufacturing capabilities. We have optimized operations in China by consolidating production in that region into one location. We also plan to invest in a new international manufacturing location to further diversify globally and increase efficiency consistent with our goal to drive higher gross margins over time. Now turning to our outlook for 2022 for the full year, we expect total Omnipod revenue growth of 15% to 20% and total company revenue growth of 12% to 16%. By product line, we expect U.S. Omnipod revenue growth of 18% to 23%. Our growth within Type 1 and Type 2 markets will be driven primarily by Omnipod DASH volume growth and our unique pay-as-you-go model and pharmacy channel access. We will also benefit from the commercial release of Omnipod 5 and we anticipate this latest innovation will begin to contribute to growth this year and even more so over the long term. We expect growth to be higher in the second half of the year versus the first half as we gain momentum from the launch of Omnipod 5, begin to move past pandemic headwinds and realize the benefits of other commercial investments. As a reminder, the launch of Omnipod 5 and its adoption ramp will take time due to the nature of our annuity model and given we are in limited market release for a period before transitioning to full market release. For international Omnipod, we expect full year 2022 revenue growth in the range of 9% to 14%, driven by ongoing DASH adoption, partially offset by the impact of AID competition and pandemic-related headwinds. We expect international to remain a long-term strategic growth driver and we will continue investing with a focus to expand our global footprint and to bring Omnipod 5 to our international markets. We expect international revenue growth to also be higher in the second half of the year versus the first half resulting from a slightly easier comparison, as well as expected improving conditions related to COVID. For drug delivery, we expect revenue to decline 30% to 35% as levels were elevated during the pandemic. Turning to gross margin for the full year 2022, we expect to achieve gross margin of 67% to 68% and expect it to be higher in the first half of the year as compared to the second half. We expect the decline from the prior year is driven by product mix, including ramping Omnipod 5 volume, higher costs associated with our U.S. manufacturing ramp and higher component and manufacturing costs associated with inflation. We expect this to be partially offset by the benefits of our strengthened global manufacturing operations and capabilities and increasing volume in the U.S. pharmacy channel. Looking beyond 2022, we fully expect to continue to expand gross margin over the long term as we begin to see the full benefit of our scale and manufacturing efficiencies. We still see 70% gross margin as a near-to-mid-term goal and we are driving toward it. During 2022, we expect operating expenses to rise slightly below our revenue growth as we further invest in key areas of our business while progressing our financial profitability. This includes investments in our robust innovation and clinical pipelines, increased direct-to-consumer marketing and further scaling other commercial-related activities. We are also experiencing inflationary pressure within operating expenses. 2022 will be a pivotal year as we launch Omnipod 5 and strengthen our position in a large and rapidly expanding market that remains under-penetrated. We continue to invest heavily in innovation as our team advances Omnipod 5 internationally, our iOS development effort integration with Libre and G7 and much more. This year to make the most of our Omnipod 5 launch, we expect the majority of operating expense growth will be within SG&A. Even with our increased investments and pressure from inflation, we continue to target operating margin expansion of approximately 100 basis points each year, which is our goal over the short and mid-term as we invest in long-term strategic growth drivers. At the start of 2022, we adopted new accounting guidance that reduces most of the non-cash interest expense associated with our convertible notes to an insignificant amount; cash interest expense remains unchanged at approximately $30 million per year. Finally, we expect capital expenditures in 2022 will grow slightly from 2021 with continued investment throughout our business. Turning now to our first quarter 2022 revenue guidance. We expect both total company growth and total Omnipod growth of 13% to 16%. For U.S. Omnipod, we expect growth of 17% to 20%. We expect the core drivers will be the benefits of our recurring revenue model following consistent record-setting new customer starts in 2021, and additional Omnipod DASH volume through the U.S. pharmacy channel. We expect Q1 international Omnipod growth of 6% to 10% driven by continued Omnipod DASH adoption, partially offset by AID competition and the compounding impact from lower new customer starts in 2021 largely due to the pandemic. Finally, we expect Q1 drug delivery revenue growth of 20% to 25%. Q1 is expected to be higher than each of the subsequent quarters in the year due to production timing. In conclusion, we completed another solid year of growth and strategic progress. The U.S. Omnipod 5 is launched, the preschool expanded indication filing is under active review at the FDA, we are advancing our Type 2 initiatives and our efforts to bring Omnipod 5 to our international markets are progressing. We expect 2022 to be a transformative year as we advance our strategy and build upon our existing competitive advantages to position Insulet for sustainable growth for years to come.

Thank you. Our first question comes from Jayson Bedford from Raymond James. Please go ahead.

Hi. Good afternoon and congratulations on the approval. I wanted to start with the international segment. If I include the $5 million from the fourth quarter related to inventory reduction, the international numbers are still down compared to the previous quarter. Is this just due to the inventory build in the second and third quarters that was unwound in the fourth quarter? More specifically, will the install base on a net basis show an increase over the last few quarters? Additionally, have there been any pricing changes in international markets? This seems to be related to my previous question.

Sure. Hi, Jason. Thanks for the question. And we certainly are experiencing more tailwinds and momentum in the U.S. business than in the international business, as you call out, we had this channel impact, it's something we've been monitoring actually throughout 2020. We had seen a distributor carrying higher inventory balances throughout the pandemic. And we were unexpectedly hit with it at the end of the quarter because in conversations with them, we didn't think they were going to be taking it down, but they did. So we didn't include guidance, as you said, it takes our growth rate, if you normalize for that, up to about 12%. So, pretty consistent with the growth that we've had throughout the year, 13% to 14% and so there is nothing really irregular to call out other than just normal order patterns with our distributors. Most of our business internationally is through distributors, and so it will ebb and flow between the quarters. So overall, our growth for the year ended up quarter-by-quarter over the four quarters between 12% and 14%, so pretty consistent. And as you know, we target low 20% growth to high teen growth. And we've been off that over the last year for a couple of main reasons. Obviously, the pandemic has persisted longer and then an impact on our new customer starts, as well as the AID competition that we've called out as CGM has got approval in certain countries, AID systems are starting to take off. And as we've said in our prepared remarks, Shacey highlighted that we can't wait to get Omnipod 5 in international markets and participate in the segment of the market that's growing with AID. So that's the rundown on our international business.

Thank you. I show our next question comes from the line of Josh Jennings from Cowen. Please go ahead.

Thank you. This is Eric on for Josh. With your announcement today that you've submitted for CE Mark of Omnipod 5, could you help us understand any milestones or timelines for O5 to receive an approval decision there? Is it safe to assume that an approval could be delivered in the second half of this year? And then I'll ask the follow-up to that now, you said that the U.S. limited launch will be three to five months, should we expect a similar timeline in the EU once you have CE Mark in hand?

Great. Thanks, Eric for the question. Yes, we are excited to be under active review for CE Mark. We don't really have a timeline to share beyond that as you may know, this is a new regulatory pathway, the Medical Device Regulation pathway and obviously a complex submission. We know that data looks great and we're very confident in the quality of the submission, but it could take some time for us to secure this approval. So, we haven't given guidance for timing. Just wanted to let everybody know that we are under active review and looking forward to getting that out onto the market. In terms of what the limited market release will look like, we are still finalizing that strategy, it's very likely that we would enter into select markets as part of the limited market release and then expand from there, very similar to how we rolled out DASH in our international markets where we started with a handful of markets as part of the limited market release and then expanded from there. Thanks for the question.

Thank you. Our next question comes from the line of Robbie Marcus from JP Morgan. Please go ahead.

Great. Thanks for taking the questions. So I was wondering if you could just elaborate on the limited launch and the impact it's having on user buying patterns and new patient starts. U.S. had a good fourth quarter, but I would say first quarter is looking a little below where the Street was thinking for the U.S. and for the full year as well. So would love to just get a sense of what you're seeing in those buying patterns and if patients are waiting.

Sure, Robbie. I'll begin, and then Wayde can discuss what's included in the Q1 guidance. It's only been a few weeks, but the limited market release is progressing as planned. Feedback from participants has been excellent, and we're gaining the early insights we anticipated. We're currently focusing on testing our training pathways, onboarding processes, and product experience while the team continues to enhance access. Everything is going well so far, although it's still early, and we are optimistic. Regarding buying patterns, the fourth quarter in the U.S. was very strong and exceeded our expectations, suggesting that customers are not necessarily waiting for Omnipod 5. While some may be anticipating Omnipod 5, the robust performance in the fourth quarter reflects otherwise.

Great. And regarding guidance Robbie, one thing we have to keep in mind when we compare Q4 to Q1 is the seasonality, particularly in the U.S. A couple of years ago, we thought that that may wane somewhat with move up volume into the pharmacy channel, but similar to what we experienced last year from 2020 into '21, inherent built-in behaviors exist in people starting to stock up with more pods in Q4 and driving seasonality higher in Q4. As a result, lower in Q1. We're following those similar trends in our guidance, and we'll wait and see if that does wane this year or not, but our expectation is, given the strength of the utilization in Q4 and what we learned last year about the built-in patterns in the marketplace and people's buying behavior, we'll still see pretty strong buying behavior in Q4, even though we've moved a good percentage over half of our volume into the pharmacy channel.

Thank you. I show our next question comes from the line of Lawrence Biegelsen from Wells Fargo. Please go ahead.

Hi. Good afternoon and thanks for taking the question. Shacey, did I hear you say the limited launch would be three to nine months or three to five months?

Three to nine. We haven't changed our estimate on that. That's what we've been saying all along.

And so my question is kind of what gets you to kind of the why such a wide range what would get you to the low end of that versus the high end of that, if you will, the nine months and what is the goal for covered lives you start exiting 2022? Thanks for taking my question.

Yeah. Thanks, Larry. Moving through to full market release is really dependent on just getting the number of days of use across our different customer journeys. So we have MDI users getting onboard, traditional tube pump users getting onboard, people coming from Omnipod and people who are coming from CGM or CGM naive. We look across each of those and want to confirm the training pathways, we want to confirm the onboarding pathways and of course, the product experience. So if all of that goes flawlessly, then we'll be at three months. If we learn some things in that that we want to address, then that may push us closer to six or nine months. While we're doing that, we're also working to build access. We just know there's going to be enthusiastic demand out there and we want to ensure we've got the best possible customer experience and best possible access position.

Yeah, Larry. It's Bret. I'll just add that one of the reasons why it's important is because we want to move quickly at the full market release. Some of the systems that we're testing during the limited market release or the ordering process, the onboarding process, both of which provide tremendous amounts of self-service for our users. Remember, we don't have a four-year lock-in period with our user base, and there's going to be a tremendous amount of demand from existing podders to move to Omnipod 5. We want them to be able to self-serve, and it’s a self-start on the product. That's the reason why those systems need to move flawlessly so we can move quickly and continue to focus on new starts during the full market release.

Thank you. I show our next question comes from the line of Brandon Kaczor from William Blair. Please go ahead.

Hi. This is Brandon on for Margaret. Thanks for taking the question. I wanted to focus on the 2022 guidance. There are a lot of moving pieces. A lot of good and exciting things going on through the year. So I was wondering if you could just talk about what is and what is not factored into that guidance. And I guess the three maybe things that I would focus on are one what's factored in for the global or let's say a cadence of global launch of Omnipod 5. What are you considering for a mix of Type 2 as a percent of users? And then maybe DTC investments, what are those factored into guidance is kind of ramping up. So, any color around those dynamics and what is and what is not factored in the guidance would be helpful.

Hi. Sure, Brandon. It’s Wayde, I can start that one and then I'm sure Bret would like to jump in on a couple of the business drivers that you mentioned. So our 2022 guidance for the U.S. is 18% to 23%, very strong guidance, in fact at the high end similar to the growth we had in 2021 off of much higher base and across all of our high-end guidance product lines U.S. International, we achieved the high end, they will be record-setting revenue basis for us again. Even though the percentages are slightly lower than last year, the dollar growth rates are really what we need to keep an eye on given the size of our existing base from year-to-year. So specific things that are in the guidance, obviously in the U.S. we are including the launch of Omnipod 5. What we have scenarios running on and have to watch is just as Shacey and Bret talked about whether we're at the low end three months and where the full market release or if it takes us to nine months, and given the annuity model that we sell through in the pharmacy channel with our pay-as-you-go model, it is a pretty significant difference to the year whether we get it at the three months or at the nine months end of the range. And so that's something we'll be monitoring very closely throughout the year. The mix of Type 2 is interesting, again it will be Omnipod 5 dependent. We've been pretty consistent at 35% to 40% of our new customer starts have been Type 2 over the last few quarters and throughout 2021 and so that's what we would expect it to be. However, as Omnipod 5 ramps and Omnipod 5 has Type 1 indication as Shacey said in our prepared remarks we're working on Type 2. So we do think that the Type 2 mix could be lower as Omnipod 5 ramps given that it's indicated for Type 1 only at this point in time.

And then from a DTC standpoint, we have had really good success in driving increased awareness for our products. Bret maybe you could talk to where the market stands today on lack of awareness and why we think DTC is still a strong driver for us. Yeah. Thanks, Wayde. Once we get to Omnipod 5 we will really have the most complete offering. We pointed to the lack of an AID system is being a headwind for us, not just internationally, but in the U.S., but we've had these tailwinds of pharmacy Type 2 and DTC and in my mind, when we add AID now to the best form factor in the marketplace in Omnipod awareness becomes the next frontier for us. We've already made tremendous strides in DTC, TV commercials, our learnings in converting those leads that come in to new starts have been tremendous. I look forward to the improved messaging in the addition of AID to Omnipod. That should be an enhancement to DTC at a better message and should drive even better conversion rates. It’s something we'll continue to do. We look forward to doing it throughout the year, and you'll see our message evolve as we approach the full market release of Omnipod 5 to include that AID message in those TV commercials.

And Brandon just one note, although we are really excited to have them both under active review, the preschool expansion and international Omnipod 5 are not factored into our guidance.

Thank you. I show our next question comes from the line of Jeff Johnson from Baird. Please go ahead.

Good afternoon, everyone. Shacey, you just answered my last question about whether Omnipod 5 is available in international markets. However, I’d like to ask a more detailed question about the international aspect. I understand the MDR pathway is difficult to predict. Do you think a timeframe of six to 12 months is a conservative estimate for setting some guidance on that? More importantly, if we assume we receive the CE Mark around July 1, will there be an additional six-month or twelve-month period we need to consider for reimbursement in major countries like France, Germany, or the UK? How long do you expect it will take to receive reimbursement for Omnipod 5 so that it can start making a significant contribution to your international revenue? Thank you.

That's a great question, Jeff. There is indeed a significant amount of work involved in market development. When we discuss Europe or international markets, it's easy to think of them as a single entity, but Europe consists of over 20 different countries, each with unique business models, market registrations, and reimbursement pathways. The positive aspect is that we are actively working on this. We have teams focused on market development, but the pace of progress will vary by market; some regions will advance quickly while others may take longer to establish coverage and access for Omnipod 5. I can't provide a specific timeline for the MDR process, as it is still in the early stages and the pathway is not yet well defined. We are confident in our submission, which is currently under review. However, this uncertainty is why we haven't included it in our guidance for this year. As we make progress, we will keep you updated. We will transition into a limited market release that is quite similar to what we have in the U.S., mainly because we need to complete the remaining market development tasks related to establishing access and market registrations, once we obtain the CE Mark.

Thank you. I show our next question comes from the line of Joanne Wuensch from Citi. Please go ahead.

Good evening and thank you for taking the question. You certainly have a lot going on, but I do want to ask about Libre 3 and G7. And it's a two-part question. How long do you think it takes to integrate it with Omnipod 5 and is that something that needs to be submitted by you by them or what's the regulatory pathway?

Great. Joanne, yeah, it's a very exciting pipeline. We've talked now today about preschoolers and the international launch, and of course, CGM integrations, Type 2 and iOS, so there's a lot going on very exciting. I think everything is progressing well. The work to integrate with G7 and with Libre has been underway for quite some time. Based on ICGM pathway and clearance for DexCom and G7, there should not be actually a regulatory submission. That's one of the beautiful things about the interoperable pathway. And so that should go relatively straightforward and the long pole in the tent there really is the technical work. Right now, Libre may likely require a submission, that work is underway as well. We own those submissions, so it's our responsibility to work with our partners to do the development work and get the regulatory clinical and technical support that we need and then those submissions would be ours to manage.

Thank you. I show our next question comes from the line of Danielle Antalffy from SVB Leerink. Please go ahead.

Hi. Good afternoon, everyone. Thanks so much for taking the question, and I haven't had a chance to congratulate you on Omnipod 5 approval, very exciting. I have a two-part question. So first internationally, I'm just curious if you could talk a little bit more about why AIDs are still much more competitive internationally versus the U.S. I mean you guys have still had very strong growth in the U.S., I appreciate with an AID is more competitive. But it feels like the pressure is greater internationally. And then the second part of the question is on limited market release and sort of how, what exactly you're looking to learn. Is that how to best train the patients and the clinicians, is it looking for patient feedback, is it about patient selection? We just love a little bit more color about the learnings that come from the limited market release. Thank you so much.

Yeah. Thanks, Danielle. Maybe I'll start with a limited market release question and then Brett can give some insight into the international market dynamics around AID. For the limited market release, what we're really looking to understand as Brett said, remember we don't lock our users into four-year agreements. So that means that everybody who has market access and coverage and has access to Omnipod 5. So that could be tens of thousands, if not more than 100,000 users in the United States. We certainly want them to be able to get onto the product, but we want them to be able to self-serve, so there are training pathways that are purely virtual for these different patient segments. If you are on Omnipod today and DexCom, you should not even need to meet with a clinician or a physician to be able to get onto the product; you need a prescription and to go through our training pathways. So that's an example of something that we want to test that pathway, make sure that everybody is satisfied and having a good experience and good success with the product after the training. And then there are a myriad of other patient pathways; the MDI user will have a different training pathway that does involve for example meeting with a physician, and most of this is really focused on the user as opposed to the clinician; the product itself is incredibly simple. It's been designed to be as hands-off as possible for the physician's office and to be very simple to use for the patient. So those are the types of things that we are testing and we just need to ensure that we get a good amount of patients across each of those patient pathways. We need good feedback and confidence in the experience across each of those pathways, and then of course, we're building access in the background. But those are the types of things that we're looking to test.

Yeah. Hi, Danielle. It’s Bret. For AID competition internationally I know it does appear that it's stronger than it was in the U.S., but a couple of things. One, we've had AID competition in the U.S. for about six years now. It's just been something we've been living with and there are tailwinds in the U.S. that have helped us, it just don't exist to the same extent in our international markets. Those are really three things: one is Type 2, remember with 35% to 40% of all of our new starts coming from Type 2, that doesn't exist internationally. If so, if you were to take that out of the U.S. number, you'd see significantly lower results with new starts, that's one. The second is really the pharmacy lift. Both the pharmacy experience and the premium we get of pricing of Pods in the pharmacy channel help our revenues in the U.S. The third really is DTC, that's been significant for us over the last few years, it's been a significant spend. It's not really available to all of our markets outside the U.S. So that's something that although we've tried in markets like Germany and Canada, it's not something we can do everywhere. AID is new in our international markets. It's a change and something that we're feeling today, and we just have to work on those tailwinds so that we have that lift between now and when we launch Omnipod 5 to compete better internationally.

Thank you. I show our next question comes from the line of Matt Taylor from UBS. Please go ahead.

Thank you for taking the question. I saw that you had said in the prepared remarks that you're making progress on the iOS development, Apple development. Could you just give us an update there and talk about next steps and any color on timing that you can give for that.

Sure, Matt. Thanks for the question. We have been working on the iOS project for some time now and although I can't provide a specific timeline update, I can share that the progress is going well and we are quite excited about it. Our strategy has always been to incorporate insights from our limited market release of phone control on Android into the submission and launch plan for iOS. We want to complete this phase before submitting, but right now, it's not the main bottleneck; it’s more about finishing the technical work. This will require a 510(K) submission, so we are focused on completing our technical work and then applying any insights gained from our limited market release with Android full phone control before submitting for 510(K) clearance to the FDA.

Thank you. I show our next question comes from the line of Steve Lichtman from Oppenheimer. Please go ahead.

Thank you. Hi, everyone. Just wondering how we should think about the potential for Omnipod 5 to positively impact new patient flow even before the full launch. I think, Shacey, you've talked in the past about given no capital upfront that people who are on Omnipod can switch to 5 once available. Does that provide an opportunity for you, even if you're not explicitly building it into 2022 guidance?

Yeah. Thanks for the question, Steve. I guess I would point to Q4 as an example or an illustration of the fact that I think people get the business model, right. What we are trying to avoid there is a slowdown before a new innovation launches and just helping educate clinicians and customers that they can get on the product and they'll be able to convert over to Omnipod 5 once their insurer covers the product. I think the main focus there is to ensure that we don't see a step back as we bring new innovation to market and I think Q4 is illustrative of the fact that people get it and they're not delaying their choice to get on product as we get closer and closer to the launch of Omnipod 5. So I wouldn't necessarily look at it as an upside, but I think it's a great indication of the power of the business model that we don't slow down as we bring new innovation to market, and that's very exciting. It's a great thing for patients and a great thing for Insulet.

Yeah. Steve, this is Bret. Part of our message to both health care providers and patients is that the quickest pathway for Omnipod 5 is to be on DASH today because there is self-service training components for anybody that's on DASH. The training doesn't become a bottleneck for anybody that wants to start on Omnipod 5 right away. The best thing they really can do is start on DASH today, go through the training so that when Omnipod 5 comes out in a full market release fashion, they're able to self-serve on that training and more quickly onboard with Omnipod 5. So that's the message that's resonating. Shacey, I agree it's not really driving additional new starts, but it is preventing people from waiting, which is what we're trying to do.

Yeah. And then, Steve, I could just pick up on the guidance part of that question. The way to think about it is, if we're at the shorter three to six months’ end of the limited market release period, that helps push us to the higher end of the guide. If we end up more in that six to nine months timeframe, then that's one of the reasons that could push us to the lower end of the guide. Obviously, depending on how successful we are with Omnipod 5 throughout the year, it starts to build into our annuity model and can help us at the end of the year or as we build momentum into 2023.

Thank you. I show our last question in the queue comes from Kyle Rose from Canaccord. Please go ahead.

Great. Good evening, everyone, and thanks for fitting me in. So I wanted to just ask a more of a bigger picture I guess business model question. Wayde, I think you reiterated the comment about future years of leverage being in the ballpark of 100 bps. I guess I'm just trying to understand if you could unpack that for us just a little bit. When I think about the work you're doing on manufacturing. I think about the some of the investments you're making. I understand that they take investments upfront, but they do appear to be more scalable long-term thinking, things like the pharmacy channel, patient led onboarding, DTC advertising. I guess maybe what additional investments from a fixed cost or an infrastructure perspective need to be put in place that would kind of constrain that to only 100 bps year-over-year moving forward assuming the topline growth is there.

Yeah. Good afternoon, Kyle. This is key to our financial thesis. The summary level is that we see ourselves in a very differentiated position in a leadership position within a very large total available market here both the Type 1 and the Type 2 and a leadership position in it, and so we want to be able to continue to invest to capitalize on that leadership position. We'll do that through major areas, our R&D being one of the largest ones. One of the ones you didn’t mention, but significant investments in driving innovation for years to come. As Shacey said in our prepared remarks, we've talked publicly about a lot of the projects that we have that now have clinical submission timelines. Behind that, our pipeline is also being invested in for significant advancements in further generations of our current products for TAM expansion, for international expansion. Just a lot coming in the pipeline. So heavy investment in R&D to continue penetrating this large available market for us. As you mentioned, manufacturing, I want to make sure capacity stays ahead. You mentioned leveraging the pharmacy channel. You're right, it is a more efficient channel for us. We've got over half of our volume flowing through the pharmacy now and so we are getting benefits from that. As Brett mentioned earlier, we are investing in direct-to-consumer strategies to increase awareness, as the majority of the market for Type 2 and nearly all of the market for Type 1 still consists of individuals using multiple daily injections. We have a significant task ahead in market development, and direct-to-consumer initiatives are a key part of that effort. Additionally, we plan to continue investing in our sales team to support these initiatives in both Type 1 and Type 2 markets. Another critical area of investment is our international expansion, which requires substantial resources, particularly concerning regulatory and government affairs, as well as the capabilities necessary to deliver our products in those regions. We expect to maintain this cycle of heavy investment while also strengthening our financial profile. This year, we experienced a notable increase in operating margins and EBITDA, a deliberate move to enhance our financial strength, and we aim to build on that progress year after year. We are targeting a 100 basis points improvement annually as we work towards a stronger financial profile. Our goal is to leverage our leadership in this differentiated position while simultaneously bolstering our company's financial status.

Thank you, sir, I'm showing no further questions at this time. I would now like to turn the conference back to Shacey Petrovic for closing.

Thank you, Dalam. I want to take a moment to share some of the unsolicited and wonderful feedback we've received from Omnipod 5 users during what has been just a few weeks of limited market release. Bethany, mother of a one-year-old shared a quote, Omnipod 5 has allowed me to be more present for my son because I'm not constantly thinking about my own diabetes; and Kevin, father of a 16-year-old is elated about how Omnipod 5 has changed their lives. He shared a quote, today with the third morning in a row my son woke up with perfect blood sugar and no overnight lows. Omnipod 5 is a dream come true. Finally, John, who has been on a pump for over two decades shared his lifetime of personal challenges and frustration managing his diabetes. In his words, quote diabetes has taken its toll on me mentally, I bottled up and try to stay strong for my wife, my kids and those who love me, I am tired. With Omnipod 5, I've slept through the night uninterrupted for the first time in a very long time. Thank you for all your hard work to make this dream a reality. We cannot wait to bring Omnipod 5 and its unmatched benefits to the broader diabetes community so that it can help millions of more people just like it's doing for Bethany, Kevin and John and their families. Thanks again for joining us today and have a great evening.

Ladies and gentlemen, this concludes today's conference. Thank you for participating and have a wonderful day. You may all disconnect.