Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation Fourth Quarter 2023 Earnings 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. I would now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations.

Thank you. Good afternoon, and thank you for joining us for Insulet's Fourth Quarter and Full Year 2023 Earnings Call. With me today are Jim Hollingshead President and Chief Executive Officer; and Lauren Budden, our Interim Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our 2023 results and 2024 guidance will be available on the Investor Relations section of our website. Also on our website is our fourth quarter supplemental earnings presentation. We encourage you to reference that document for a summary of key metrics and business updates. Before we begin, we remind 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. We'll also discuss non-GAAP financial measures with respect to our performance, namely adjusted growth and operating margin, adjusted EBITDA and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance, and we believe they are helpful to investors, analysts and other interested parties as measures of our operating performance from period to period. Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year reported basis with the exception of revenue growth rate, which will be on a year-over-year constant currency basis. With that, I'll turn the call over to Jim.

Thanks, Deb. Good afternoon, and thank you for joining us. With our strong Q4 2023 results, we capped off another transformational year, in which we firmly established Insulet as the market leader in automated insulin delivery. In 2023, we realized a 30% revenue growth, which marked our eighth consecutive year of 20-plus percent revenue growth and represented dollar growth of almost $400 million. We accomplished this while also significantly expanding margins and generating positive free cash flow. Our record new customer starts in 2023 fueled our global growth, and our Omnipod 5 AID system, which generated $1 billion in revenue in 2023, is transforming diabetes management. We entered 2024 with significant momentum, and we are looking forward to a year of many growth catalysts ahead. On today's call, I want to do three things: first, discuss our financial results and market traction. Next, I'll provide an update on the continuing progress of our clinical efforts and then review key developments in our innovation pipeline. Our fourth quarter revenue once again exceeded our expectations with total Omnipod growth of 35%, including U.S. growth of 43%. Part of our outperformance was driven by U.S. distributors placing additional orders near the end of the quarter, which we had not factored into our guidance. We'll provide more detail on this in a few minutes. Yet even without these additional orders, we closed out 2023 ahead of our expectations, including healthy margin expansion. These are remarkable results, and I want to thank our global team for their execution and dedication. We are proud of the incredible impact the Omnipod product platform is having on people with diabetes. We recently achieved milestones of roughly 425,000 active global customers on the Omnipod platform, which represents growth of approximately 25% from this time last year. This also includes almost 250,000 customers on Omnipod 5, which has proven to be revolutionary. And Omnipod DASH continues to drive strong new customer starts in our U.S. type 2 diabetes market as well as in most of our international markets. We are thrilled that our unique technology is making a meaningful impact on the diabetes community, advancing our mission to improve the lives of people with diabetes around the world. Omnipod 5 is the only FDA cleared, fully disposable pod-based AID system. This makes our product unique and clearly differentiated from competitors' offers. These product attributes underpin our competitive advantages and are key to fueling our growth, further establishing our leadership position and expertise in the diabetes market. The fully on-body wearable AID experience of Omnipod 5 dramatically reduces the daily burden of living with diabetes. And its simplicity, ease of use and broad and affordable access are also key drivers of its rapid adoption. For almost a decade, we have significantly invested in U.S. pharmacy channel access, including building the infrastructure, developing key pharmacy relationships, creating an easy onboarding pathway, and building deep in-house expertise, all of which has resulted in a strong and leading channel access we have today. We continue to strengthen Omnipod's access and affordability, including our innovation pipeline that will go through this channel by building on our advantages. In the U.S., Omnipod 5 continues to represent the vast majority of our new customer starts in Q4, and we expect this trend to continue. In addition, customer retention remains strong. The mix of U.S. new customer starts coming from multiple daily injections and legacy tubed pumps continued at an estimated 80-20 percentage split. Today, even with improved technology, most people using insulin still use MDI as their mode of care. More than 60% of people with type 1 diabetes in the U.S. are on MDI, and the vast majority of people with type 2 diabetes are using daily injections. Therefore, bringing people out of MDI and onto Omnipod remains the largest opportunity for us, and we continue to drive pump penetration and share gain in both the type 1 and type 2 markets, strengthening our leadership position. Omnipod 5 not only drove our number one position for U.S. customer starts in 2023, it was the most prescribed AID system in the U.S. This is because a growing number of health care providers are writing scripts for it. In Q4, we saw another increase in prescribers growing to over 18,500, up from 17,000 in Q3. We speak with many HCPs, and it is clear that Omnipod 5 is the winning choice for AIB. It is extremely gratifying to see the growing demand, confidence and adoption which have led to a growing number of scripts HCPs now write for our system. Our strong new customer starts included the continuing adoption of Omnipod in the U.S., type 2 diabetes market. We estimate that no more than 5% of people with type 2 diabetes who need intensive insulin therapy are currently using any kind of pump. And we know that we are already the market leader in that space. We are confident that Omnipod will prove to be a simple and compelling solution for the millions of people globally with type 2 diabetes who today need insulin therapy as a part of their diabetes care regimen as well as the future millions who will naturally progress to requiring insulin as a part of their care. We are well positioned to bring all of the benefits of the Omnipod platform with people with type 2 diabetes both today and in the future. In the fourth quarter, type 2 diabetes patients represented between 20% and 25% of our U.S. new customer starts across our Omnipod suite of products. While Omnipod DASH, with its type 2 indication for use is the leading insulin pump operating in this market, we look forward to marketing Omnipod 5 to type 2 patients once we have an expanded indication. The underlying demand is apparent. We expect the last participant to complete our type 2 pivotal trial in the coming weeks, and we plan to submit results to the FDA by the end of 2024 for an expanded indication. We are confident this will be another catalyst that will fuel our growth trajectory, allow us to serve more patients and help us deliver on our mission. We look forward to sharing study results at ADA this June. The success of Omnipod 5, including its early yet powerful impact in two of our European markets, led to another strong quarter of new customer starts globally. Internationally, we realized a notable sequential increase in new customer starts, driven by the impact of Omnipod 5 that's having in the U.K. and Germany. Our early success in these countries supports our confidence that it will continue to transform diabetes care and position us as a market leader everywhere Omnipod 5 is available. We remain on track with our Omnipod 5 plus G6 European launch plans with the aim of making Omnipod 5 accessible to the majority of our European customers by the end of 2024. We are also thrilled to begin our journey launching Omnipod 5 integrated with Abbott’s Freestyle Libre 2 Plus sensor. I'll speak to this new opportunity in a moment. In addition to our type 2 pivotal study progress, we are meaningfully advancing several other clinical initiatives. We are excited to attend the ATTD International Conference in Italy in a couple of weeks where we will present data for the Omnipod 5 plus G6 randomized controlled trial. This RCT compared Omnipod 5 to non-AID pump and included study sites in the U.S. and France. We are thrilled to have recently published in the Diabetes Technology and Therapeutics Journal real-world evidence from almost 70,000 people with type 1 diabetes, demonstrating Omnipod 5's effectiveness in a large, diverse population. The data are impressive and demonstrate the strength of the Omnipod 5 algorithm in the real world delivering leading time in range and very low hypoglycemia, reinforcing Omnipod 5 as the obvious choice for clinical outcomes and personalized diabetes care. Central to everything we do is our mission to simplify life for people with diabetes. We want to make it easier for people to get prescribed therapy, get set up on therapy and use therapy consistently over time. This is the point of our evolution feasibility study taking place in New Zealand. Our intent is to have a next-generation algorithm that will further drive simplicity of use. We completed the first feasibility study in participants with either type 1 or type 2 diabetes, commencing initially in a supervised hotel setting and then progressing to at-home use. We are pleased with the preliminary results and are analyzing the data and making modifications for the next round of subjects. We will present early feasibility results at ATTD. Lastly, we continue to actively enroll participants in our RADIANT study in France, the U.K. and Belgium, which is our Libre 2 integration trial. We began enrollment in September 2023, which is now halfway complete. Feedback has been tremendous and physicians new to Omnipod 5 appreciate its simplicity and potential to reach many more pump-naive users. As a reminder, both our G6 and Libre 2 studies are designed to provide the evidence we need to elevate Omnipod 5 status as superior first-line therapy and help drive our pricing and market access initiatives as we further roll out Omnipod 5 with multiple sensors across our international markets. I'll now provide an update on our innovation progress and we'll focus on three key areas: expanding the Omnipod 5 platform, moving upstream in the type 2 market with Omnipod Go and building our digital and data capabilities. Many of you have heard us say that our current Omnipod 5 system is our 'minimum' viable product. That's easy to forget given how quickly the market has adopted Omnipod 5 and made it the leading offer. Our current version is on only one operating system, Android. It is integrated with only one continuous glucose monitoring partner, Dexcom and until recently, was commercialized with only G6, and it contains our first-generation algorithm. This is about to change with platform extensions that will strengthen our leadership, deepen our competitive moats and allow us to open up Omnipod 5 to many more customers. To start, we are excited to have commenced our U.S. limited market release of Omnipod 5 with G7 over the last two weeks. This initial release will allow us time to test the market and build product at scale to prepare for what we are confident will be a very successful full market release of G7 this year. We anticipate an acceleration in new customer starts following a full launch, which will help to fuel our revenue growth more meaningfully in 2025 and beyond. We are also on track with our planned limited market release of Omnipod 5 with Libre 2 Plus in the first half of this year in the Netherlands and U.K. made possible by the CE Mark approval we received earlier this month. We are excited that the option for customers to use Omnipod 5 with both G6 and Libre 2 Plus will enable us to reach many more patients. Our recent and upcoming CGM integrations are important milestones in providing choice to tens of thousands of customers who want to use Omnipod 5, and we believe both integrations will be a significant catalyst for our growth in 2024 and beyond. Rounding out near-term innovation, we are planning for our U.S. launch of Omnipod 5 with the G6 system with our iOS app this year. This will mark a major innovation milestone because so many of our U.S. customers use Apple iPhone and prefer to carry only one phone. Another innovation that will allow us to reach more people and further expand our total addressable market is Omnipod Go, a solution designed for individuals with type 2 who naturally progress to requiring basal-only insulin and want a simple way to receive their daily dose while avoiding the burden of injections. Our commercial pilot is underway, and it will help us refine our commercialization plans. Omnipod DASH has already made Insulet the leader in insulin delivery for people with type 2 diabetes. And with Omnipod Go, we are well positioned to move upstream in the patient care pathway. When we achieve clearance for Omnipod 5 in the type 2 market, we will bring all the advantages of our AID system to this market. With these three products, our aim is to deliver an Omnipod portfolio that meets the full range of needs of people with type 2 who require insulin as a part of their care. We are excited about our innovation in the space and our ability to address the unmet needs that exist in this patient population. It is a massive global market that we expect will continue to grow, and we have the clear lead to pursue this market opportunity. We are also excited to build on our digital and data capabilities. One of the breakthrough features of Omnipod 5 is the real-time data provided by SIM cards in every controller. We constantly hear from physicians and patients how much they appreciate not needing to plug in for real-time usage data, and 100% cloud connectivity has already given us the opportunity to publish the largest, real-world data set on AID. Over time, we plan to use the data to speed our product development, further improve the user experience, streamline physician workflows and build on our competitive advantages. We also continue building digital and data-driven products to simplify diabetes management for both customers and caregivers. In closing, Insulet continues to set the standard for the industry. With a strong 2023 behind us, we see multiple catalysts in the coming year and beyond. We are confident we will drive significant growth and continued success. I want to thank our Insulet global team for your dedication and deep passion for our customers and your commitment to delivering innovation. You are the reason for our success and our ability to continue to drive our mission to simplify life for the millions of people with diabetes around the world. With that, I will turn the call over to Lauren.

Thanks, Jim. 2023 was another exciting year for Insulet, and the fourth quarter was no exception. We have strong momentum with many catalysts that will drive revenue growth and margin expansion in 2024 and over the long term. In Q4, we generated strong global, new customer starts fueled by the continued high demand for Omnipod 5, not only in the U.S. but also in our first two European markets. As a result of our growing customer base, we delivered 37% revenue growth in Q4, driven by global Omnipod growth of over 35%. We benefited from a shift in order timing and an increase in days on hand at certain pharmacy distributors, which I'll speak to in a moment. Without these benefits, our results still exceeded our guidance ranges. On a reported basis, for total revenue, foreign currency was a 130 basis point tailwind compared to Q4 of last year. U.S. Omnipod revenue growth was 43%, which continues to be driven by our annuity-based model and growing U.S. pharmacy volume. This includes an increasing volume contribution from Omnipod 5 and the related premium for pods in the U.S. pharmacy. Pharmacy channel access continues to be a benefit for the many reasons Jim spoke to, and our efforts to drive increased volume through this channel have resulted in almost all of our U.S. volume going through the pharmacy channel. The recurring net volume benefit we recognized in Q4 from new customers who received their starter kits and first refill orders was in line with our expectations and remain consistent with Q3 levels. We expect this trend to continue. Also as expected, the same net volume benefit from existing customers converting to Omnipod 5 was immaterial since the vast majority had already previously converted. In Q4, U.S. revenue benefited from two dynamics not previously contemplated in our guidance. First, our largest U.S. pharmacy wholesalers collectively placed an estimated $20 million to $25 million in orders that were accelerated from the first quarter of 2024 in advance of our implementation of a new ERP system at the start of 2024. The second benefit was an increase in estimated channel inventory days on hand of approximately $10 million to $15 million as pharmacy distributors returned to their normal levels. As a reminder, in the first half of 2023, we called out a reduction in inventory days on hand below normal levels. What this boils down to is approximately $30 million to $40 million in revenue in Q4 that we had not anticipated, contributing approximately 12 points to our U.S. revenue growth. We are proud of our fourth quarter U.S. performance, especially given the tougher comparison due to the Omnipod 5 full market release in August of 2022. Additionally, new customer starts in Q4 were slightly down from Q3 as expected as the market is moving from Dexcom's G6 sensor to G7. We are excited to have launched our U.S. limited market release of Omnipod 5 with G7. And as Jim shared, we expect new customer starts to accelerate throughout 2024 as we ramp our commercial efforts. Overall, our U.S. business and related revenue growth are very strong, fueled by Omnipod 5's success and continued robust demand. International Omnipod revenue increased 12.5%, which was above our expectations. Growth was primarily driven by continued strong adoption of Omnipod DASH and to a smaller degree, a benefit from our Omnipod 5 launches in the U.K. and Germany, both of which drove notable increases in new customer starts. On a reported basis, foreign currency was a 550 basis point tailwind over the prior year, which was approximately 250 points favorable versus our guide. In Q4, our estimated global attrition and utilization trends remained stable. Drug Delivery revenue was almost $9 million, representing a $5.5 million increase, which was above our guidance range due to timing. Gross margin was 70.9%, up over 1,200 basis points. Excluding the impact of the 2022 medical device corrections, adjusted gross margin increased 620 basis points to 70.7% in Q4 2023. This exceeded our expectations due to favorable manufacturing costs and product mix. The increase in adjusted gross margin was primarily driven by improved manufacturing efficiencies and favorable mix that included a premium from volume growth in the pharmacy channel. Partially offsetting the favorable contributors were expected higher production costs as U.S. manufacturing continues to ramp and become a larger portion of our total production. Operating expenses increased in line with our expectations as we invested in our business to support our strong growth trajectory, including gearing up for near-term product launches globally. Adjusted operating margin was 20.7% and adjusted EBITDA was 26.9% of revenue. Both were above our expectations, primarily due to the $30 million to $40 million revenue benefit I mentioned, which had an estimated 360 basis point favorable impact on adjusted operating margin. To a lesser extent, both outperformed due to our higher-than-expected gross margin. Turning to cash and liquidity. We ended the year with over $700 million in cash and the full $300 million available under our credit facility. At the end of January, we successfully repriced our Term Loan B at a lower interest rate, which will reduce interest expense on an annualized basis by almost $2 million. We also achieved the milestone during the year of turning free cash flow positive, generating approximately $70 million in 2023. We continue to strengthen our financial position, giving us the flexibility to invest throughout our organization to drive long-term sustainable growth while at the same time expanding our margins and generating positive free cash flow. Now turning to our 2024 outlook. We continue to expect another year of large dollar growth even with the significant volume benefits realized in 2023, most notably from our Omnipod 5 ramp. We expect to approach total company revenue of $2 billion at the high end of our guidance range. For the full year, we expect total Omnipod revenue growth of 13% to 18% and total company revenue growth of 12% to 17%. As a reminder, our total company growth expectations exclude approximately 3 points due to the estimated $20 million to $25 million in orders that were accelerated to the fourth quarter of 2023. For U.S. Omnipod, we expect revenue growth of 16% to 21% driven by strong Omnipod 5 adoption as well as recurring revenue from Omnipod DASH and the benefits of our annuity model and pharmacy channel access. As a reminder, we have a tougher comparison in 2024, resulting from the significant 2 scripts and retail channel net stocking volume benefits in 2023. In addition, our expectations exclude approximately 4 points of growth due to the estimated orders that shifted into 2023. When factoring this into both periods, our normalized expectation for 2024 at the high end of our range is in line with the color we provided on our third quarter call of mid-20% growth. We anticipate new customer starts in the first half of 2024 to be slightly lower than the levels we had in the second half of 2023 due to normal seasonality trends, and we expect an acceleration in the second half of 2024 following a full market release of Omnipod 5 with G7. Also, as a reminder, estimated revenue from Omnipod 5 with our iOS app and from Omnipod Go is expected to be immaterial. We also currently expect the cadence of our revenue growth to be weighted more towards the second half of 2024 due to the timing of new customer starts, partially offset by the Q4 2023 stocking benefit. For international Omnipod, we expect revenue growth of 7% to 10%, which is in line with the 2024 color we previously provided of high single digits. On a reported basis, we are assuming no foreign currency impact. We expect growth to be driven by ongoing Omnipod DASH adoption and from our recent Omnipod 5 launches in the U.K. and Germany. We expect continued headwinds in the countries where we do not yet have Omnipod 5 to partially offset this growth. We are excited to enter our first European markets in the first half of 2024, with Omnipod 5 integrated with Abbott's FreeStyle Libre 2 Plus and to launch Omnipod 5 with G6 in another market around the same time. As a reminder, given the nature of our annuity model, we expect these launches to more meaningfully contribute to our growth rate in 2025. We continue to expect the first half of the year to be in the high single digits range and to accelerate in the second half of the year to a range of high single digits to low double digits, primarily due to a more meaningful contribution from our Omnipod 5 U.K. and Germany launches and, to a lesser extent, the additional launches in 2024. Lastly, for Drug Delivery, we expect a 50% to 60% decline in line with the 2024 color we previously provided. Turning to 2024 gross margin. We expect a range of 68% to 69% and anticipated benefit from favorable product mix and manufacturing efficiencies. Partially offsetting these tailwinds are higher costs associated with our new product launches. We expect gross margin in the second half of the year to be higher than the first half due to accelerating revenue throughout the year and continued manufacturing efficiencies. In 2024, we plan to expand both gross and operating margins while driving market growth. We expect operating expenses to increase as we invest in R&D and clinical and expand our sales force and other functions to support our commercial efforts and growth initiatives, including our near-term product lines. Our sales force expansion includes hiring some reps specifically focused on pediatrics, a population for which Omnipod has always captured a large share. Even with increased investments, we have many opportunities to significantly expand margins and increase shareholder value, and we remain committed to doing just that. We expect operating margin to be approximately 13%, up approximately 100 basis points from 2023 adjusted operating margin. When factoring in the 130 basis point year-over-year unfavorable impact in 2024 from the $20 million to $25 million shift in order timing, we expect operating margins to be approximately 200 basis points higher in 2024 over 2023. We expect operating margin to significantly improve in the second half of the year over the first half due to revenue ramping during the year and continued manufacturing improvements. We have many catalysts for growth in 2024 and considerable opportunities to drive further margin expansion over the near and long term coming from scaling the business efficiently even with the continued focused investments in our robust innovation pipeline and commercial efforts. We expect capital expenditures to almost double from 2023 due to the timing of spend to support our planned 2024 production at our new Malaysia manufacturing facility as well as investments to support continuous improvement efforts in our other manufacturing locations and to a lesser degree, investment in IT infrastructure. Turning to our first-quarter 2024 guidance. We expect total Omnipod growth of 15% to 18% and total company growth of 17% to 20%. Our total company revenue expectations exclude approximately 6 points of growth due to the orders that shifted into 2023. For U.S. Omnipod, we expect growth of 19% to 22%, which excludes over 8 points of growth due to the orders that shifted into 2023. For international Omnipod, we expect growth of 5% to 8%. On a reported basis, we estimate a favorable foreign exchange impact of approximately 100 basis points. Finally, we expect Q1 drug delivery revenue to be approximately $5 million to $6 million. In conclusion, we delivered another quarter and year of significant financial performance and strategic execution. We have strong momentum at the start of 2024 with many catalysts ahead and as a result, we are in a fantastic position to continue to grow and efficiently scale our business. The global market opportunities for Insulet are tremendous, and we will continue to invest in innovation with an increased commitment to significant margin expansion. We are well positioned to drive long-term value creation for our shareholders and to deliver on our mission for our customers.

Our first question comes from the line of Travis Steed with Bank of America.

I wanted to ask about the guidance on U.S. growth. If you just do the math using year-over-year growth rates, you get 2% from stocking which implies like 18% to 23% versus kind of the mid-20s guide before. But I know you said in the script like there was really no change to guidance. And I guess if you just do it on dollars, you kind of get to the same place. Maybe you can just provide some clarification on the U.S. guide and how it's changed versus 3 months ago.

In November, when we provided our guidance, our perspective on it hasn't changed significantly. As I mentioned earlier, we experienced an incremental revenue shift of $30 million to $40 million, with $10 million to $15 million attributed to increased days on hand inventory levels. We observed a reduction in inventory levels earlier in the first half of the year, which contributed to this change. The remaining $20 million to $25 million resulted from a shift in order timing from the first quarter to the fourth quarter, occurring ahead of our ERP implementation. If we adjust for this, which added about 12 points to our U.S. revenue growth rate, we did achieve the higher end of our guidance range.

Your next question comes from the line of Robbie Marcus with JPMorgan.

This is actually Rohin on for Robbie. You came off a really great year on both the top and bottom lines with continued health and new patient growth in the U.S. as well. I was wondering, if you could elaborate more on some of the key growth drivers to new patient growth as well as margin expansion in 2024 and beyond.

Thanks, Rohin. I'll address the first part, but I'm sure Lauren may have additional comments. The primary driver for new customer acquisitions is that Omnipod 5 is clearly the most favored product in the market. We lead in new customer acquisitions, particularly among those transitioning from multiple daily injections, and we're continuously gaining share from competitors. The current Omnipod 5 offering is already a significant growth driver for us. Additionally, we have several initiatives planned for 2024 that will further enhance our growth. We're looking to expand Omnipod 5 internationally next year as mentioned. We're also aiming to launch the G6 product in the Netherlands and provide sensor options in the U.K. and the Netherlands in the first half of the year. By the end of 2024, we anticipate that Omnipod 5 will be accessible to most of our customers in European markets. Furthermore, we're excited about the advancements with the G7, having accelerated its launch by a couple of weeks ahead of expectations. We have already been in the market with the G7 limited market release for about 2.5 weeks and plan to roll out a full release during the year, which we believe will further increase our new customer acquisitions. We're very enthusiastic about the many upcoming innovations that will contribute to our growth in addition to our strong market position with Omnipod 5. I'm sure Lauren may want to respond to some of the points you raised as well.

So yes, we have a lot of additional opportunities for improvement, especially if we exceed our revenue targets and you saw that in Q4, we had tremendous operating margin. It was over 20% on an adjusted basis. And if you normalize for the revenue shift, it was about 17%. So if we can exceed revenue, we can have a lot of incremental margin opportunity. But keep in mind that we will be balancing that with investment. So as Jim mentioned, we have a lot of new product launches coming up, and we want to make sure we're executing on our strategic imperatives to drive future growth in 2025 and beyond. So we will be balancing that with the revenue drop through to the bottom line.

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

Jim, you're encouraging to hear that O5 in the majority of the EU markets by the end of 2024. That's the good thing. I didn't hear anything on G7 integration with O5 in Europe. In 2024. I know you are specifically not providing that, but any color you can provide there, especially in the context of talking about your U.S. growth accelerating in 2024, just as the market is starting to move to G7 and you need to get that FMR on G7 out there in the U.S. to then take advantage of that move to G7 that Dexcom has seen. So I guess, it sounds like that lack of G7 integration could be a headwind in '24 offset by the O5 expanding in EU. So just how do we think about those two disparate factors, if you will?

Thanks, Jeff, it's great to connect. One way to approach this is by recognizing our focus on sequencing. We understand how crucial it is to enhance the integration with sensors and to offer customers a choice of sensors. Currently, we are progressing with the LMR for G7 in the U.S., which will provide us valuable insights into that integration. We are confident in our progress as it has passed the EIR. However, it’s important to launch the LMR into the market to observe its performance and ensure customer satisfaction. Our learning from this LMR will help us speed up G7's rollout both in the U.S. and internationally. While we haven't announced a timeline for introducing G7 outside of the U.S., the LMR plays a vital role in that strategy. Similarly, we are aiming to hasten the LMR for the Libre 2 Plus integration in Europe and are diligently working towards that goal. Early experiences from the RADIANT trial, which focuses on our Libre integration in Europe, indicate that it offers a great experience for customers. Thus, we are accelerating that LMR in Europe as well. While we haven't provided a timing estimate for Libre in the U.S., it’s clear that we are handling both LMRs simultaneously to optimize our learning and resource allocation across different regions. Our top priority is to ensure swift sensor integrations, allowing customers who wish to use Omnipod 5 to do so. The success of Omnipod 5 has been transformative, and many customers want to be part of it. We are committed to integrating sensors as quickly as possible across various regions to enhance access and options for customers, all while optimizing our approach to maximize learning and speed to market.

Our next question comes from the line of Jayson Bedford with Raymond James.

Regarding international expansion, do you anticipate being able to set prices with Omnipod 5? Additionally, what factors are delaying the launch into new European markets more quickly by the end of the year?

Yes, Jayson, that's a great question. We've consistently discussed this in the past. Our goal with Omnipod 5 is to generate the necessary evidence, which we're doing through our G6 RCT and the RADIANT trial. This evidence will help us establish Omnipod 5 as a first-line offering, allowing us to negotiate for reimbursement in international markets at levels that reflect the added value of Omnipod 5. We're aiming for a price premium. This approach differs from our U.S. strategy, where we launched Omnipod 5 in the pharmacy channel with pricing parity to DASH to expedite full market coverage. In Europe, our focus is on negotiating with various reimbursement bodies which differ by market, including tenders and health ministries. It's crucial to generate the required evidence to facilitate these discussions, and so far, we've been successful. In the U.K., we're satisfied with our reimbursement levels, and we're making similar progress in Germany and other markets. We'll continue to work hard to achieve a premium for Omnipod 5 wherever we launch it. As for the second part of your question regarding gating factors, they vary by market. Sometimes it's reimbursement, while other times it's related to cloud connectivity, where we've made significant progress. Additionally, we need to prepare for the commercial launch to ensure everything is ready. We're making excellent progress. I want to clarify that we didn't state we'd be in the majority of our markets by the end of 2024; rather, we said that by the end of 2024, the majority of our European customers will have access to Omnipod 5.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

I wanted to follow up on Travis' question regarding the guidance. Essentially, Lauren, my question is whether anything has changed since the Q3 call and the JPMorgan presentation. You mentioned that the high end of the guidance suggests mid-20s, so why is that the case? Was there an incremental change? I recall you said at JPMorgan that new starts would increase year-over-year in 2024, but I didn't catch that in your comments today. I'm also curious about your guidance philosophy in general. Has anything shifted from Insulet's historically conservative approach to guidance?

Larry, we’re experiencing a technical issue on this call, but I’ll do my best to address your question. Regarding our guidance, there haven’t been any significant changes. The forecast we provided for revenue and new customer starts remains consistent with what we shared in November. The notable shift is the unusual order pattern, where we realized $20 million to $25 million in revenue earlier than expected. We are still projecting an increase in new customer starts for 2024. The only significant update in our guidance compared to what we previously indicated is our expectation of approximately a 13% operating margin for 2024, which represents an improvement from our earlier comments in November. We have several opportunities to achieve this. Our operating income in 2023 was very strong, exceeding our initial guidance for that year, which was in the high-single digits—around 9.5% or more. In fact, we surpassed that expectation. Now, with our new guidance of 13%, as Lauren mentioned in her prepared remarks, this reflects an increase of 100 basis points from what we achieved at the end of 2023, and more than 200 basis points higher than if we hadn’t had the revenue pulled forward. The 13% operating income guidance is the only real update from what we communicated in November, I hope that clarifies things.

Our next question will come from the line of Margaret Kaczor with William Blair.

Wanted to maybe follow up on HCP prescribers. Obviously, that's a number that continues to grow quarter on quarter on quarter. Curious if you can provide any details around that? Are these folks routinely prescribing? Are you seeing growth in the number of prescriptions? Maybe how does this compare to the number of pump prescribers in the U.S. And sorry, it's a long-winded question, but it really gets at this concept of how can you open up the part of the intensive insulin patient population, type 1 or type 2 that is being seen outside of the Endo's office and really scale that effort.

Thank you, Margaret. That's a great question. I'll start and if Lauren wants to add anything, she’s welcome to. To provide some context, we didn’t include this in our prepared comments this quarter, but in the past, we’ve indicated that the endo market in the U.S. is about 7,000 to 7,500 endos. We know many of our prescribers are endocrinologists or their physician extenders, like nurse practitioners and physician assistants, but we're also seeing a significant number of prescriptions coming from outside of endo practices, especially from primary care and smaller practices, and this trend is continuing to grow, which is reflected in our data. Although we don't have complete visibility into all available data, it’s clear that we are reaching an increasing number of healthcare practitioners. This growth is largely attributed to word of mouth and our promotional activities aimed directly at patients and physicians online. Additionally, our Omnipod GO commercial pilot has proven to be a valuable investment this year as we are gaining insights into the primary care channel for individuals with diabetes. We’ve identified the target patient population for Omnipod and discovered that when primary care practices think of pumps, they often picture the old tube models that they wouldn’t prescribe. However, when they see Omnipod, they realize it’s simple enough for their patients, creating an opportunity for us to drive demand for the Omnipod platform within primary care. We are also noticing a higher number of type 1 patients than we initially expected in this channel. Therefore, we are very optimistic that as we continue to learn from our Omnipod GO pilot, we will uncover new opportunities to boost demand for Omnipod and extend pod therapy to patients who need it most. We view this trend as a positive indicator and are excited about the insights we are acquiring through our commercial pilot.

Your next question will come from the line of Josh Jennings with TD Cowen.

I was just hoping to better understand pricing dynamics through the pharmacy channel in the U.S. for Omnipod 5 and DASH. Was reimbursement stable that Insulet was receiving for Omnipod 5 and Omnipod DASH in '23? And how should we factor in reimbursement levels and pricing for Omnipod 5 and DASH in 2024?

Yes. So really, it's more about a volume business at this point. We did get a big price lift throughout 2023 from the conversions into the pharmacy channel. But as we've mentioned previously, those conversions are largely complete by this point. So we're not seeing that going forward. We did have a price increase like we normally do in early September, which was pretty minimal. It's just under 3% kind of in line with the cost of living adjustment. So just keep in mind there, though, we don't see the full benefit of that because some of it goes to the DDM in terms of rebates and to the wholesaler fees. So at this point, for 2024, I would pretty much say that you should focus on the volume, not the price has leveled off. The great news is that we are getting that continued price lift going forward, but it shouldn't be an incremental change.

Your next question comes from the line of Joanne Wuensch with Citi.

This is Anthony on for Joanne. 2024 is kind of investment year, maybe 2025 as well. But can you talk over the longer term, 2026 and beyond where gross margins and operating margins potentially could go and how you get there?

Yes, I'm happy to start off and then Jim feel free to add on. Yes, we definitely feel like we have room for expansion, both on margin and gross margin in the near term and in the longer term. We did great in Q4, and we have lots of opportunities as we're setting up with the product launches that we have this year that will accelerate the top line and be able to allow us to drop more through. We haven't put out guidance beyond 2024, but we are planning on doing a long-range plan later in this year.

Your next question will come from the line of Matthew O'Brien with Piper Sandler.

It is going to be one question, I promise. The first part is just more clarification kind of to Larry's question earlier, but I'm looking at the stock down kind of mid- to upper single digits in the aftermarket. I think it's on this guidance commentary. And again, the high end of the range gets you to that 25%. Was it a street modeling issue at 25% versus where it should have been 23%, 24%. I'm just making sure there's nothing competitively or pharmacy related that we should really be worried about? And then the real question is, Jim, when you guys came out with O 5, I think you went from 80/20 MDI to competitive conversions all the way to 60-40, and then it went to 70-30, now we're back to 80-20. Is it getting tougher and tougher to take those competitive conversions? And with G7, do you think that will start to get a little bit better, a little bit easier throughout the course of this year?

Let's have Lauren begin with the guide, and then I will address the competition. Go ahead, Lauren.

For 2024, despite the significant volume growth we experienced in 2023, we are anticipating very strong revenue growth. We aim to reach nearly $2 billion in revenue, with our guidance indicating a $300 million increase in revenue. Regarding your question about the changes since our last call, the adjustments relate primarily to a revenue shift of $20 million to $25 million in orders that were originally scheduled for Q1 but were placed ahead of our ERP implementation. This is expected to impact the total company by 3 points and U.S. Omnipod by 4 points. Overall, our guidance remains robust. As previously mentioned, we have numerous growth catalysts for 2024 that will accelerate our momentum, especially in the latter half of the year with new customer starts, ensuring strong revenue growth for this year and extending into 2025 and beyond.

I'm sorry, Jim. I was just going to say that you nailed it. I thought I heard you say that the U.S. is now being modeled at 25% on a normalized basis. So if I understood you correctly, that's exactly right for the year on a normalized basis. And Lauren was right when she mentioned the 4-point impact. When Lauren provided details on the Q3 call, she indicated we would be in the mid-20s, specifically referring to 24 to 26. At the midpoint, we're right on target for what we expected for the U.S. This translates to about 21% on a normalized basis for total Omnipod, leading to an overall company growth of 20%. So it aligns perfectly with what Lauren shared in November. We just didn't anticipate the $20 million to $30 million shift that occurs, meaning that the $20 million to $25 million ends up being double, resulting in the 40 to 50, as it shifts from one year to the next. That’s what she was trying to clarify. Hopefully, that clears up your question. Sorry, Jim.

We can clarify this offline. It's a decrease in the denominator and an increase in the numerator for '24, leading to the normalized number. This results in a $20 million to $25 million impact. The underlying guidance remains consistent. Regarding competition, we're still seeing strong new customer starts. Historically, our mix has been 80% from our market direct initiatives and 20% from competitors. After launching Omnipod 5, we attracted many competitive switchers and have performed exceptionally well. As new customer starts have increased overall, the number of competitive switches has also grown. We continue to retain the vast majority of customers switching from competitors, demonstrating strong retention. Having listened to our two competitors on their calls and observing market behavior, we haven't noticed any significant shifts in the competitive dynamics. Omnipod 5 remains the favored product. However, one competitor appears to have improved its retention of their customer base. Despite this, we are still clearly the favored choice, excelling in both MDI and new customer acquisitions across the market.

Your next question comes from Mike Kratky with Leerink Partners.

So you've capitalized on having a competitive advantage in type 2 with broad pharmacy access. How are you planning on defending that position in the market as we start to see additional pumps expand into the pharmacy channel on both a near-term basis and then looking ahead to 2025?

Thank you for the great question. Our Omnipod platform is much better suited for the pharmacy channel compared to tubed pumps. At the end of the day, tubed pumps are durable equipment, and while I could go into more detail, it's no surprise that competitors are trying to enter the pharmacy channel with their own durable tubed pumps because we've established a strong presence there for automated insulin delivery. We've effectively gained market leadership across our entire product range, and competitors will follow that trend. We've learned that there is a significant learning curve in the pharmacy channel, which is quite different from the durable medical equipment space. The economic advantages favor us, as the real value lies in the pump itself, whether durable or pod-based. This creates an inherent advantage for us in the pharmacy channel. Additionally, we have broad coverage in this channel and established contracts with pharmacy benefit managers, resulting in successful growth with our partners. Insulin users frequently visit pharmacies for their supplies, making it a suitable place for them to also obtain their AID-pump therapy. Omnipod is uniquely positioned in this market, and we believe its value proposition in the pharmacy channel will continue to stand out as we move forward.

Your next question comes from the line of Chris Pasquale with Nephron.

Jim, your comments on what you've learned so far from the GO LMR were really interesting. It sounds like that's going pretty well. But I think I heard the guidance really doesn't assume any benefit from GO in '24, which makes it sound like a full launch isn't planned anytime soon. How are you thinking about the timing for a full launch? And what's really the gating factor there? What boxes do you need to check before you're ready to expand the commercialization?

Yes, that's a good question. When considering Omnipod GO, it's important to understand that we are currently in a commercial pilot rather than a limited market release. The product is ready and approved, and we are actively increasing its coverage. The key focus of the Omnipod GO pilot is on learning rather than timing, as we aim to identify the right commercial model for both GO and the primary care chain. We're excited about the insights we are gaining from this pilot. Whether we commercialize in 2024 or later, our priority is to establish a presence in the primary care channel while also providing comprehensive offerings for individuals with type 2 diabetes who require insulin delivery. We are already a market leader with DASH and are progressing with our pivotal trial for Omnipod 5, intending to secure label approval in the near future. Ultimately, we will ensure a full range of products that support users from initiating basal insulin to those requiring intensive insulin, allowing us to effectively commercialize in both primary care and endocrinology. This is why I am enthusiastic about the Omnipod GO pilot; the knowledge we're gaining will significantly enhance our commercialization efforts as we launch the complete portfolio.

Your next question will come from the line of Steve Lichtman with Oppenheimer.

As you start opening up the opportunity here to the Libre platform outside the U.S. and then in the U.S., can you give us your latest thoughts on the size of that opportunity? There's been estimates on what that new opportunity set looks like. It would be great to get your latest color on that.

We see this as a significant opportunity. The sensor market includes millions of users for both Dexcom and Abbott's sensors. With the integration of our products like the G6, G7, Libre 2, and the emerging Libre 3, we are prioritizing the development of these technologies together. This strategy opens a vast market for us. We enjoy collaborating with both partners, as they possess excellent technology and are strong allies in development. While they have different positions in key regions such as the U.S. and Europe regarding their installed bases, both have substantial numbers of users. As we've mentioned before, the continuous glucose monitor (CGM) experience facilitates users transitioning to our Omnipod, and we believe the integrations with Libre will create a significant installed base in both Europe and the U.S. of users familiar with on-body CGM, making them more receptive to adopting Omnipod.

Your next question will come from the line of Marie Thibault with BTIG.

Sam on for Marie. Maybe I can follow up on some of the type 2 comments. And just looking at pivotal data coming up at ADA and then filing for label expansion, how much of an uplift could that be once you do get the expanded label there? Just considering 20%, 25% of new patient starts are already coming from type 2?

Thanks, Sam. If you just look at the size of the end markets there, and I'll repeat numbers that we shared before. In the U.S., there are about 1.6 million people living with type 1 diabetes. And if that market is about, probably, something less than 40% penetrated with AID therapy. Then in the type 2 market, there are somewhere between 3 million and 4 million people living with type 2 who are on basal-only therapy. And somewhere around 2.5 million people living with type 2 in the U.S. who need intensive insulin therapy, so basal plus bolus. Omnipod 5 is really aimed at that intensive insulin therapy population, about 2.5 million people in the U.S. And therefore, it's a larger end market than Omnipod 5 plays in now with its current label. We know that, that market is less than 5% penetrated with AID therapy. And we are already the market leader in that segment of the market because Omnipod DASH has a label there, and we know we're the clear market leader in the space. So we're very optimistic. Omnipod 5 is very easy to use. It takes a lot of the burden off of managing your diabetes. That's why it's been so successful in the type 1 population. And we're very optimistic about that value proposition going into the intensive insulin-using type 2 population, which is a larger end market than the one we're playing in today. So we think it is a really important opportunity and a market that, by the way, will continue to grow over time.

We have time for one more question. Your final question comes from the line of Danielle Antalffy with UBS.

Just a question on the wholesaler stocking and that whole dynamic because it is something now we have to start thinking about in the model, But and I know it's unpredictable. But qualitatively, maybe you could talk about how much visibility you have into when that pod that gets stocked goes on to a patient. I guess trying to get a sense of is this something that's going to happen to this level every single quarter, if they're going off the shelves very quickly? How long do the stocking sort of fit on the shelf there?

No, it doesn't stay on the shelf that long. It's a pretty efficient channel. Regarding the visibility into the inventory levels, that's not something we have ever included in our guidance, and it's beyond our control. Unfortunately, this quarter we faced the situation where inventory levels were increased after being reduced earlier in the year, along with the ERP pull forward dynamic. I don't anticipate seeing something of that magnitude again. However, when we encounter situations like this, we inform you as it happens; we cannot provide guidance on it since it's not within our control.

And we do have time for one more question. That question will come from the line of Matt Miksic with Barclays.

Great. I have a two-part question that includes both good and potentially challenging news. You mentioned that you are seeking acceleration with the G7 integration. Given the high growth and significant share of new patients you are capturing, could you clarify what additional patients the G7 will attract that you are not currently reaching, considering the advantage you have in the clinic? Additionally, looking ahead a year or 18 months, it appears likely that a competitor may release another tubeless pump. How do you plan to approach that situation? What strategies will you implement to maintain your leadership in that segment, and how should investors consider these factors in terms of potential growth?

Thanks, Matt. I'll address those questions in reverse order. Regarding the tubeless form factor, we closely monitor our competitor pipelines. Based on what we can see publicly, we don't anticipate any upcoming products that come close to our current offering with Omnipod 5, especially when considering the overall convenience, ease of use, scalability, and features like automated needle insertion. We are very confident in our competitive position. While we respect our competitors and understand that Omnipod's success attracts interest, we believe there is nothing on the horizon that matches our capabilities, and we plan to continue driving innovation to extend our lead. As for the first part of your question, we're performing exceptionally well in the market with our existing product. We view it as a minimum viable product that has exceeded expectations. Specifically, regarding G6 and G7, the data shows that G7 is gaining traction with new customers. To use an analogy, if we compare our market to a stock pond, there is still a significant amount of G6, but increasingly, there's more G7 being introduced. We aim to tap into both opportunities, but G7 is becoming a larger segment of the market. We are excited about the synergy between Omnipod 5 and G7, which we believe will contribute significantly to our growth, similar to the success we experienced with Omnipod 5 and G6.

This concludes our Q&A section. I would like to turn the conference back to Jim Hollingshead.

Thank you, everybody, for joining us today. We are really excited to have delivered another outstanding year for Insulet. We're focused on extending our leading position with our deep expertise and strong emphasis on innovation, operational excellence and further improving the customer experience. We remain committed to driving value for our shareholders through margin expansion and cash flow generation, all while maintaining our emphasis on investing for growth. I also want to once again thank our outstanding Insulet global team for their dedication and their focus on innovation and passion to our customers. Thank you, everybody. And with that, I'll thank you all and wish you all a great evening. Good night, everybody.

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