Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation First Quarter 2024 Earnings Call. As a reminder, this conference call is being recorded.

Thank you. Good afternoon, and thank you for joining us for Insulet's First Quarter 2024 Earnings Call. With me today are Jim Hollingshead, President and Chief Executive Officer; and Ana Maria Chadwick, Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our first quarter results and 2024 guidance will be available on the Investor Relations section of our website. Also on our website is our 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 gross and operating margins, 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 from period to period, and we believe they are helpful for others as well. 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 rates, 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. Coming out of 2023 that saw Insulet emerge as the clear industry leader, we entered 2024 with significant momentum. We were off to a great start in Q1, fueled by continuing strong demand for Omnipod 5. Our global Insulet team continues to execute at a high level, bolstering our confidence in another year of robust revenue growth and margin expansion. Our first quarter revenue results exceeded our expectations for every product line. Given those results and the cascade of innovations that we plan to deliver this year, we have increased our guidance for both top line and operating margin growth. On today's call, I want to do three things: provide a high-level review of our Q1 results and the continuing strength of our competitive position in the market; give an update on our broad innovation agenda for 2024 including our efforts to expand the Omnipod 5 platform and our progress in the type 2 market; and discuss our ongoing efforts to capture the value of scale across our business. Starting with financial performance. Our first quarter revenue and margins exceeded our expectations. We achieved total Omnipod revenue growth of 21%, including U.S. growth of 23% and international growth of 15%. In the U.S., we continue to build on our clear leadership in the market, and our Omnipod 5 automated insulin delivery system was number one in new customer starts by a wide margin. Demand for Omnipod 5 remains very high, and U.S. new customer starts were robust and in line with our expectations. Omnipod 5 is designed to expand the market through its ease of use and easy access, and we continue to succeed in driving market growth. During the quarter, roughly 85% of our new starts came from people previously using multiple daily injections, which is our target market, and our competitive conversions remained very strong. The Omnipod platform also remains the top choice for people with either type 1 or type 2 diabetes. Type 2 patients represented roughly 25% of our new starts in the quarter. Omnipod 5 continues to be the game-changing offer we thought it would be when we first brought it to market. This is true in the U.S. and also internationally, where it is dramatically accelerating our growth. Last year's successful launches in the U.K. and Germany continued to exceed our expectations as our teams generated strong new customer starts. In fact, in Q1, more than half of our total international new customer starts were Omnipod 5. Given Omnipod 5's early contribution in our European markets, we are raising our international revenue outlook by 500 basis points to a range of 12% to 15%. As a result, we now expect total Omnipod growth of 19% at the high end and 18% for the total company, representing a milestone of $2 billion in total company revenue. Ana will provide more details on our increased guidance in a few moments. Our global results in Q1 make one thing very clear. Omnipod 5 is, without a doubt, highly differentiated and the best offer on the market. Its ease of use, pay-as-you-go economics, affordability and widespread access make it the obvious choice for insulin delivery for people with type 1 diabetes and soon for people with type 2 diabetes once we achieve label expansion. Omnipod 5 leads the market everywhere it goes, and we are not stopping there. During Q1, we made significant strides across our innovation portfolio. Because Omnipod 5 is the market leader, it's easy to forget that the current version remains our initial minimum viable product. In 2024, we will expand on the Omnipod 5 platform by bringing new sensor integrations, launching the system in new geographies and extending our phone control offering. In the U.S. during Q1, we entered limited market release of our integration with Dexcom's G7 and are on track for full market release this summer, which will allow us to expand choice for customers and capture the opportunity created by the growth and adoption of Dexcom's latest sensor. In Europe, we successfully entered limited market release of our integration with Abbott's FreeStyle Libre 2 Plus sensor in both the U.K. and the Netherlands, ahead of our midyear launch plans. This release represents two firsts. Omnipod 5 is the first AID system to offer integration with the Libre 2 sensor in Europe, which is Abbott's most widely adopted CGM. And Omnipod 5 in the Netherlands represents our first sensor of choice pod offering. These pods are compatible with both Abbott's Libre 2 Plus and Dexcom's G6 sensor. Early results from the U.K. and the Netherlands are extremely promising, and we look forward to providing future updates with regard to the timing of full market release. Staying in Europe, we are pleased to announce that we now plan to launch Omnipod 5 with G6 in France also this summer. France has historically been one of our largest markets, and one in which we know demand for our solutions is high. When we first launched Omnipod DASH in this market, it quickly became the insulin pump brand of choice, and we are confident in our ability to drive strong adoption with our advanced AID system. With the launch in France, we will achieve our stated goal of making Omnipod 5 accessible to the majority of our European customers and reach this milestone ahead of our internal end-of-year expectations. We anticipate our recent Omnipod 5 international launches will fuel accelerated new customer starts in the second half of this year and revenue growth next year and beyond. We also plan to enter our U.S. limited market release for our iOS app this summer. Extending Omnipod 5 onto the iPhone platform is one of our most frequently requested features, and we are excited to bring this offer to market. Turning to the opportunity in type 2 diabetes, where we remain the U.S. market leader in this large and underserved patient population. The commercial pilot with Omnipod GO, our FDA-cleared offering for the over 3 million people in the U.S. who need daily basal-only insulin, continues to offer significant learnings. Because of our pilot efforts, we have developed a better understanding of this market, and we have expanded the definition of targeted patient segments. We now also have even greater confidence that we will be able to bring our innovative technology to a broader range of healthcare providers and physician practices. We are refining our plans for extended commercial reach based on those learnings. We also know that there is significant current demand for solutions that support intensive insulin use for people with type 2 diabetes. In this market, Omnipod DASH continues to perform extremely well driven by its ease of use and accessibility. In that context, we are very excited about the progress we are making towards achieving FDA clearance for Omnipod 5 for type 2. During Q1, we reached a key milestone in our SECURE-T2D pivotal trial with the last patient completing the protocol. We are well on track to meet our goal of submitting to the FDA for label expansion by the end of the year. Once cleared, we expect to meaningfully accelerate Omnipod 5 adoption among the approximate 2.5 million people with insulin-intensive type 2 diabetes. And we will have the broadest offering of insulin delivery technology solutions on the market for this important patient population. Lastly, we continue to analyze the market impact of GLP-1 use. Analysis of actual claims data demonstrates that GLP-1 use accelerates the adoption of insulin among people living with type 2 diabetes. The data is definitive and striking and strengthens our conviction in the size of the unmet need and the size of the business opportunity for our growing type 2 portfolio. We are finalizing our analysis and look forward to providing a more detailed update soon. 2024 is shaping up as we planned to be a year filled with a cascade of innovations that will allow us to build on our position and market leadership, and we will take advantage of those innovations because of our expanding scale. Our business continues to enjoy several advantages that we've achieved through commercial scope and operational scale. First, our products have very broad reimbursement with more than 95% of covered lives in the U.S. for both Omnipod 5 and Omnipod DASH. And through our nationwide distribution reach, Omnipod is available at retail pharmacies that are within 5 miles of over 85% of the U.S. population. Our strategy to increase awareness of Omnipod with endocrinologists and primary care physicians has resulted in an expanded base of healthcare providers writing prescriptions for our products, fueling our leadership position. In the U.S., in Q1, the number of U.S. Omnipod 5 prescribing healthcare providers grew to over 20,000, up from over 18,500 the prior quarter. These prescribers were endocrinologists, primary care physicians, and other healthcare providers, and the split was approximately one-third each. And the prescribers span both the type 1 and type 2 markets and both increased substantially year-over-year. In order to fuel our growth, we are further expanding our commercial reach. Internationally, we continue to prudently invest in our commercial expansion and in our market access capabilities. In the U.S., we are in the process of incrementally expanding our sales force, including the creation of new territories and expansion into targeted pediatric centers. Our broad sales, marketing and channel capabilities allow us to reach a large and growing population of patients and represent a growing set of advantages over aspiring competitors. Lastly, we also enjoyed significant financial benefits from our scaled manufacturing. Insulet has been on a 20-year journey of capability building and continuous improvement, which has allowed us to build world-class capabilities to drive ongoing quality and productivity. Manufacturing scale and scope have been big drivers of our gross margin expansion over that time, and we expect our new Malaysia facility will fuel continued efficiency gains. We are in the final stages of validating our manufacturing lines in Malaysia and expect to begin producing salable product in Q3. The facility represents a sizable investment of approximately $200 million over the course of four years through 2026, provides approximately 400,000 square feet of manufacturing space and is expected to house more than 1,000 full-time employees at full capacity. Our regional sourcing strategy includes using local suppliers for components contributing to resiliency and improved costs. This facility will also strengthen our global operational capabilities, drive increased capacity to meet our robust demand and support future international market expansion. We expect our Malaysia site to be accretive to gross margin in its first full year of production ramping over time. It represents one of the many opportunities we have to lower total landed product costs and expand margins over the near and long term. Our advantages in scope and scale put Insulet in a strong position to continue to invest in the growth of our business and to expand our margins. This is yet another way in which our business is unique among our direct competitors. With that, I'll introduce Ana, who is joining us for her first call as our CFO. As you will have seen in our announcement, Ana is a highly accomplished and proven leader. We are thrilled to have her join the Insulet team, and I'm personally looking forward to benefiting from her partnership as we execute our strategy to drive rapid growth and strengthen our financial profile. Over to you, Ana.

Thank you, Jim, and good afternoon, everyone. Before I dive into the first quarter financial results, I want to say how excited I am to be part of this outstanding company. Insulet is transforming diabetes management and improving the lives of hundreds of thousands of people while driving strong financial performance. I am confident that we're just getting started, especially with the exciting developments in our pipeline. I look forward to partnering with Jim, our skilled leadership and the rest of Insulet's talented global team to advance our mission for our customers while also delivering robust revenue growth, margin expansion and shareholder value. And above all else, I look forward to helping make a positive impact on people around the world with diabetes. Now on to our first quarter results. First quarter exceeded our expectations, and we generated strong global new customer starts. As a result of our growing customer base, we delivered 23% revenue growth driven by global Omnipod growth of 21%, and our estimated global retention and utilization trends remain stable. Foreign currency was a 50 basis point tailwind for our total revenue on a reported basis compared to first quarter last year. U.S. Omnipod revenue growth was 23%, driven by robust growth on both type 1 and type 2 diabetes customer bases as well as expanding volume through the pharmacy channel. Adoption of Omnipod 5 integrated with G6 continues to be the driving force, and we are excited to have launched our U.S. limited market release with G7, which we expect will accelerate new customer starts in the second half of this year, following our planned full market release this summer. Our U.S. business and related revenue growth are very strong, fueled by Omnipod 5 success and robust demand. With many catalysts ahead of us this year, we're laying the foundation for sustained revenue growth for 2024 and beyond. International Omnipod revenue increased 15%, which was well above our expectations. While Omnipod DASH remains the largest percentage of our overall international volume, last year's Omnipod 5 launches in both the U.K. and Germany continue to drive notable increases in new customer starts and were the primary drivers of our accelerated growth. On a reported basis, foreign currency was a 210 basis point tailwind over the prior year, which was approximately 110 points favorable versus our guidance. Drug Delivery revenue was almost $9 million, which was above our guidance range due to timing. Gross margin was 69.5%, up 230 basis points on a reported basis and up 460 basis points compared to prior year adjusted gross margin. The increase in gross margins, which exceeded our internal expectations, was primarily due to volume growth in the U.S. pharmacy channel with a premium on the pods as well as our international Omnipod revenue performance and improved manufacturing efficiencies. While operating expenses increased in the quarter as we invest in our business, including multiple product launches globally, the timing of some expected spending shifted into the remainder of the year. We will continue to invest to drive above-market growth while remaining committed to expanding operating margins through improvements in gross margin as well as efficiencies throughout our global business. Operating margin was 12.9%, and adjusted EBITDA was 20.2% of revenue, both exceeding our expectations, primarily due to higher-than-expected revenue and gross margin as well as timing of spend. Turning to cash and liquidity. We ended the quarter with approximately $750 million in cash and the full $300 million available under our credit facility. As anticipated, our increased efforts to drive profitable growth are translating into expanding margins and a stronger overall financial profile. Now turning to our 2024 outlook. For the full year, we're raising expectations for total Omnipod revenue growth to a range of 15% to 19% and total company revenue growth to a range of 14% to 18%. For U.S. Omnipod, we are raising the low end of our guidance and now expect a range of 17% to 21% revenue growth. We expect growth to be driven by strong Omnipod 5 adoption, which provides the benefits of a recurring revenue stream due to our annuity model. We continue to anticipate both revenue dollars and new customer starts in the second half of 2024 to be higher than levels in the first half of 2024, consistent with normal historical seasonality trends. Additionally, our planned U.S. full market release of Omnipod 5 with G7 this summer is expected to contribute to the acceleration of new customer starts in the back half of the year. We are well positioned to accelerate new customer starts this year, which we expect will drive further revenue growth next year and beyond. We have massive market opportunities not only from further type 1 MDI penetration but also as we continue to penetrate the type 2 market. We are building a type 2 product portfolio and are excited to have this be one of our accelerated growth drivers over the near and long term. For International Omnipod, we are raising our revenue growth expectations by 500 basis points to a range of 12% to 15%. On a reported basis, we now assume an unfavorable foreign currency impact of 100 basis points. We expect growth to be driven by last year's Omnipod 5 launches in the U.K. and Germany, partially offset by headwinds in the countries where we do not yet have Omnipod 5. The substantial rate in our international revenue outlook reflects the outperformance of new customer starts and revenue since we launched Omnipod 5 in the U.K. and Germany, and to a lesser extent, the additional launches in 2024. We originally expected revenue growth in the first half of the year to be in the high single digits. With our revised outlook, we now expect first half growth of 13% to 15% and similar second half year-over-year growth profile, also up from prior expectations. We expect our recent Omnipod 5 launches in Q1 to contribute to new customer starts in the second half of the year and given the nature of our annuity model to more meaningfully contribute to our revenue growth in 2025. We have strong momentum internationally, and we are confident that Omnipod 5 will drive growth and share gain in every market in which we launch. For both the U.S. and International Omnipod, we expect quarterly revenue fluctuations resulting from the many product launches we have in 2024. This includes ramping inventory in channels for new launches and reducing levels for prior Omnipod generations. We do not expect this to materially impact our full year outlook. Lastly, for Drug Delivery, we are reaffirming our expectations of a 50% to 60% decline. Turning to 2024 gross margin. We are reaffirming a range of 68% to 69%, closer to the midpoint of the range. While we have a number of opportunities that could result in further gross margin expansion this year, we want to be prudent with our expectations given risks that come with significant product launches and setting up a new manufacturing facility. We are in a fantastic position to continue driving further gross margin expansion over the near and long term, and we remain committed to doing so. We also have an increased commitment to drive operating margin expansion. While we continue to expect operating expenses to increase as we invest in R&D, clinical and our commercial launches, we now expect to drive some operating leverage as we capitalize on our efficiencies and economies of scale. As a result, we are raising our operating margin expectations to approximately 13.5%, up 50 basis points from our original expectations. Although we don't guide to our effective tax rate, I will provide color since our income continues to grow. Our first quarter effective tax rate almost doubled to approximately 6% due to changes in income distribution among our jurisdictions. Given the positive trend in our earnings, we may reach a point this year where we conclude that the valuation allowance we have against our net deferred tax assets is no longer needed. We estimate this would result in a $200 million non-cash reduction of income tax expense in the period the release is recorded, which we would adjust out for non-GAAP purposes. Subsequently, our effective tax rate may increase to an estimated annualized operational run rate of approximately 20% for the near term. Turning to our second quarter 2024 guidance. We expect total Omnipod growth of 18% to 21% and total company growth of 15% to 18%. For U.S. Omnipod, we expect growth of 21% to 24%. Growth drivers include the ongoing adoption of Omnipod 5, bringing with it the advantages of the U.S. pharmacy channel, continued strong new customer starts, and the benefits of our annuity model. With our new customer starts momentum, we expect sequential growth in the second quarter, partially offset by wholesalers taking down G6 pod inventory as we begin to ramp G7 pods. And we expect to see some meaningful second half sequential dollar growth for the many catalysts we discussed. For International Omnipod, we expect growth of 12% to 15%, driven by the ongoing adoption of Omnipod 5 in our initial markets, partially offset by headwinds in countries where we do not have Omnipod 5. On a reported basis, we expect an unfavorable foreign currency impact of 200 basis points. Finally, we expect Q2 Drug Delivery revenue to be approximately $4 million to $5 million. In conclusion, our strong first quarter results reflect continued successful execution of our strategy as well as robust new customer starts in both our U.S. and international markets. In my first few weeks at Insulet, I have been incredibly impressed with what the company continues to accomplish, and I am even more energized by the incredible opportunities that lie ahead, which are greater than I had envisioned before joining. We are well positioned and remain committed to delivering sustained revenue growth and margin expansion for the balance of this year and well beyond.

Our first question is from Margaret Kaczor Andrew with William Blair.

Maybe just to start with kind of a big picture question. 2024 certainly seems like a year probably as active as you guys have been with new launches with an eye maybe towards 2025 acceleration in revenues as the new patient starts to accelerate in the back half of this year. So one, I guess, is that how you guys are thinking about it? And then two, is it too forward to think that as new patients start to accelerate in the back half, those can add a step change in new start growth? Or is it going to be more of a steady acceleration as you launch all of these different initiatives in the back half of this year?

Thanks, Margaret. Great question. We think that the timing of the product launches is really critical to ramping over the course of the year in '24. And so that's why we're really excited to be in limited market release and be able to say that we anticipate full release of G7 in the U.S. over the summer and to already be in limited market release going really well with our sensor of choice offering including the Libre 2 Plus in Europe. And we do think that both new customer starts will continue to accelerate over the course of the year and revenue continues to accelerate, and we'll see the revenue results more strongly in the second half.

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

Congrats on a really nice quarter. Wanted to ask on what you're seeing competitively in the market, both in type 1 and type 2. Type 2 starts were particularly strong. It sounded like new patient growth wasn't a record but was still very robust, and I think it was expected to be below record given no G7 integration yet or Apple. But would love to hear how you feel you're doing competitively in terms of new patient share and any competitive switching? And also, if I could just tack on. I heard there was destocking in the second quarter. Was there any stocking or destocking in the first quarter? And how do we think about the dollar impact in the second quarter in the U.S.?

I think there are several points to address. First, regarding stocking, we will only highlight that if we notice anything unusual. The stock in the channel has returned to normal levels. We don’t see anything out of the ordinary and won't comment further unless there's a noticeable change. This quarter's dynamics are completely typical. As for our competitive position, we are very confident. In the first quarter, new customer starts in the U.S. met our expectations, and Europe performed exceptionally well, which led us to revise our guidance upwards. Regarding the competitive landscape, I’ll summarize our view concisely. In the U.S., for type 1 diabetes, the majority of the market is still relying on MDI. We estimate that approximately 40% of type 1 patients are using some form of pump technology, while 60% are not. Our Omnipod 5 is specifically designed to transition users from MDI to our technology due to its ease of use, accessibility, economic advantages, and positive clinical outcomes. This is why we target MDI as our key market, where we perform strongly. We clearly dominate the MDI market, and Omnipod 5 is the technology driving growth in type 1 due to our leadership position. In the smaller segment that has been penetrated, there is some competitive switching occurring. However, we consistently experience net positive results in competitive switching, despite the limited market size and the four-year lock-in associated with tubed pumps. Overall, we lead in type 1, type 2, and MDI, and we excel in competitive switching among our existing users. We are highly confident in our position, and Omnipod 5 excels wherever it is introduced, as evidenced by our recurring success.

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

Jim, maybe we can stay on that type 2 point, so forgive me if you've already talked about this, and I think put a good focus on it. But we've seen the ATTD data that suggests GLP-1s might bring heavy insulin users back down into that 60, 65 unit a day range where you can put them on a pump. We know you guys have shown some strong real-world data on T2 time in range. So some of your competitors. So it sounds like the KOLs are starting to push more and more for getting these type 2 intensives on AIDs as well. And you guys especially have been investing in the primary care channel where I think a lot of that T2 care is delivered. So how close are we getting to the precipice of kind of this inflection in type 2 uptake? And I know it's been going up in your numbers the last few quarters. We can see that. But it seems like we're still maybe not there but getting really close to an inflection not just for the market but maybe your competitive positioning in there with O5 as well.

Thank you for the question, Jeff. We are very excited about the potential for AID in the type 2 market, where we are already the clear leader with Omnipod DASH. In the pump market, our position with Omnipod DASH is very strong. As you know, we do not promote Omnipod 5 since it does not have the label for that market, but it is being prescribed off-label quite often, which you can infer from our numbers. That's why we are thrilled to be nearing the FDA filing for a label extension. Currently, we feel somewhat limited in the market, but we believe that obtaining this label extension will allow us to significantly increase the use of Omnipod 5 specifically in the type 2 market. We are close to completing our pivotal trial; we have finished enrollment and have had the last patient complete the trial. We are now in the process of gathering and cleaning the data for our FDA filing, which we expect to submit by the end of the year. We are on track to meet this timeline and based on what we've observed from our competitors, we are ahead in this market. Furthermore, Omnipod 5 is well-positioned in the type 2 space due to its ease of use, discreetness, pharmacy availability, and strong outcomes, which we will further validate with data. We are very optimistic about the type 2 market as it represents a significant unmet need, and we believe we will have the leading offering in the market, likely being first to launch.

Your next question comes from the line of Michael Polark with Wolfe Research.

Maybe a quick follow-up on type 2 there. Is it the expectation that we'll see data from the SECURE trial at ADA?

Yes, Michael, thanks for the question. It's our intent to show data from the STeP trial at ADA and with a specific focus on showing the subset analysis of people who are on GLP-1s in that data.

And your next question comes from the line of Travis Steed with Bank of America.

I wanted to follow up on the Q2 guidance. It looks like the guidance you gave is sequentially down, but you said in the prepared remarks you expect sequential growth in the second quarter offset by the wholesalers taking down G6 inventory. And curious if you could help quantify what that guide assumes for the impact of the G6 inventory piece so we can kind of get the underlying Q2 guidance.

Travis, this is Ana. Thanks for the question. I think the main point here is to take a step back, and as you look at the U.S., we not only reaffirmed our full year guidance. We actually are taking up the low end. And as I mentioned in my prepared remarks, as we have all these cascade of new product launches, both in the U.S. and international, we're making assumptions. And as we do that, the key here is to remember that we believe the second half will be greater growth than the first, but we continue to expect the growth. And I think to call the exact timing is we're giving our best estimate. But the key important thing is that we're raising overall guidance for revenue, including international and the low end in the U.S.

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

Jim, I wanted to circle back on new patient starts in the U.S. I heard robust U.S. type 1 and type 2 new starts in Ana's prepared remarks. Were new patient starts up year-over-year in Q1 in the U.S.? And do you still expect new starts to grow year-over-year in 2024? And talk about why you see G7 as a driver of new starts growth in the second half of the year.

Thanks, Larry. Year-over-year in Q1, overall new starts were not up, but MDI was up for us. So that gives you a sense of our strength in bringing customers out of MDI into the market. We expect sequential growth over the course of the year in new customer starts in the U.S. As I said before, I expect a record for us in the U.S. and globally in new customer starts for 2024. And what was the last part of your question, Larry?

Just conceptually understand why G7 integration is a driver of that new start growth.

Thank you very much. G7 will provide support for us once we achieve full market release due to the nature of new customer prescriptions for CGM in the U.S. market. It’s clear that if you examine new customer prescriptions for CGM, G7 has surpassed G6. You may remember my metaphor of fishing in a stocked pond. We’ve done very well in the G6 pond and have led the new starts with G6. In this quarter, new customer starts have aligned with our expectations, and the absence of G7 in the market has not been a hindrance. If customers want to use Omnipod 5, they are content to stay with G6 or will acquire a G6 if they wish to start AID on Omnipod 5. Thus, G6 hasn’t posed a challenge. However, G7 will be advantageous as more patients transition to using it. We’ve consistently stated that our CGM partners support our growth, and DexCom is now facilitating that with G7. It’s crucial for us to ensure that we launch G7 in a timely manner and aim for a full market release as soon as possible. We anticipate that G7 will positively impact new customer starts in the second half of the year as we add it to our offerings.

Your next question comes from the line of Patrick Wood with Morgan Stanley.

You've mentioned several times about the insights related to type 2 diabetes. My main question is whether you believe additional investment will be necessary to effectively reach the type 2 market, especially regarding the services and support provided, as there are significant differences in the patients and the training required for primary care physicians. As we move through the latter part of this year and into next year, do you foresee the need for a renewed investment cycle in this area?

Thank you for the question. The commercial pilot aims to explore how our practices function in real-world settings. Our historical focus has been on endocrinology practices, but we're now engaging with primary care, particularly those whose behaviors align more with endocrinology when it comes to CGM and insulin use. We've been visiting these practices to understand their patient management and diabetes therapy strategies, and we've gained valuable insights. Our objective moving forward is to determine the right sales approach, which involves defining the appropriate sales representative design and support structure. Currently, we have combined representatives working alongside clinical service managers, and we're assessing whether this mix should change. We're also evaluating the reach and commercial models. We're optimistic about our findings from the pilot, especially since Omnipod as a platform is exceptionally user-friendly. Often, when we introduce ourselves as discussing insulin pumps, practices initially resist, thinking they're too complex. However, once they see Omnipod GO, their perception shifts, leading to broader discussions about insulin delivery options. We've recognized substantial potential not just for Omnipod GO, but also for Omnipod 5 in intensive insulin therapy. Additionally, we've discovered that the patient demographics are more diverse than anticipated, with both type 1 and type 2 patients present in primary care settings. This suggests greater opportunities than we initially thought, and we will be deciding on the commercial model accordingly. To address your question directly, we will likely need to invest more in sales and support to effectively tap into this market.

Your next question comes from the line of Matt Taylor with Jefferies.

I guess I was wondering if you could comment on pump market growth just with all the enhancements going on with integrations and technologies across the space. Can you comment on whether you think the market growth is accelerating or you think it will accelerate in the coming quarters or next year?

Thanks, Matt. We think that you can see the normal cyclicality in the market, but the market is growing, first. And there's two drivers of market growth. The first one is the widespread adoption of CGM. And the second big driver of market growth is Omnipod 5 because it makes it so simple to come on to AID. And so as we continue to lead in MDI with a very clear leadership in the MDI position, those MDI patients are market growth for AID, and we are leading the way there. So the technology itself is driving market growth, and our CGM partners are doing it, and we're leading the way in AID.

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

This is Phil on for Matt. And just to circle back to Travis' question from before because I'm not sure that was explicitly clear as it relates to Q2. For total Omnipod, can you confirm that Q2 growth will be sequentially up if you back out this wholesaler dynamic? And then just for some who are listening who might not be familiar, can you talk about the fact that G6 pods are different than G7 pods?

Let me start with the pods, and then I'll ask Ana to comment on the Q2 financials. The G6 and G7 pods will be fully compatible when we release the G7. Currently, the existing pods can only connect with the G6. However, once we launch the G7, the G7 pods will work with both the G7 and G6, allowing them to be backwards compatible. This means that customers who want to continue using the G6 will be able to do so since the pods will function with it, but they will also be able to use the G7. Essentially, this will provide a choice for users within the Dexcom family of continuous glucose monitors. Ana, do you want to take it from here?

Sure. I'll revisit the Q2 guidance and provide an overall perspective for the year. We are raising our guidance in the U.S., even at the low end. We anticipate there will be sequential growth as I mentioned. The key point to note is that we are making our best assumption regarding the market transition of the product. This is our best estimate, and we will provide updates as we move through the year. However, we are very confident in the guidance we've provided for the entire calendar year.

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

I guess I have a question on international. I think you mentioned that first and second half growth would be in the, I think you said, 13% to 15% range. Just given the annuity model, given the new products, geographies, why wouldn't second half growth be higher than first half?

Thank you for the question. As I mentioned, we have raised our entire guidance by 500 basis points, which reflects what Jim pointed out. The adoption of Omnipod 5 has been remarkable, and we will be expanding into more markets. Each of these European markets has its own dynamics, and some are on a four-year cycle, among other factors. Therefore, we feel confident in the guidance we are providing. In relation to new initiatives, our team's philosophy is to present achievable numbers; we aim to avoid any misses. This approach drives the significant 500 basis point increase we introduced. We expect to gain more insights in the coming months as we navigate these launches and will provide updates as needed.

Your next question comes from the line of Steve Lichtman with Oppenheimer & Co.

So yes, just building on that last question, you've given the annuity model. Really nice to see this near-term outperformance. And assuming it's led by steeper ramp in new starts, are there any new start metrics you can provide from outside of the U.S.? And are you getting a higher price point for Omnipod 5 outside of the U.S., so this is a mix opportunity as well?

Sure. We don’t provide specific guidance on numbers. However, we indicated in our prepared remarks that Omnipod 5 has had a strong start in the U.K. and Germany, with more than half of our new customer starts in Europe being Omnipod 5. This indicates strong adoption. We plan to launch in France during the summer and are currently in a limited market release in the Netherlands, with a full market release planned there as well. There is a ramp-up period to consider, and if we achieve the expected ramp in these countries, it will positively impact our revenue. The timing of the launch in France will influence this impact over the year. We anticipate a positive adoption in France, given the success and demand for Omnipod DASH among patients. Regarding average selling prices, we have successfully negotiated a premium for Omnipod 5 compared to Omnipod DASH in European markets. This differs from our U.S. launch, where we introduced Omnipod 5 at price parity. In Europe, we aim to leverage the new technology of Omnipod 5 and have focused on securing appropriate reimbursement that reflects its added value. There is a mix effect on revenue as we introduce Omnipod 5 into different markets, with the actual premium varying by market. So far, we have been successful in securing a premium for Omnipod 5.

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

I have two. And the first one is I want to make sure I have an idea of what to expect when Libre 2 is integrated with Omnipod 5 and how you think about launching that and uptake. And then the second one is in addition to the type 2 clinical data at ADA, what else should we be looking for?

Thank you, Joanne. We are very excited about the integration of Libre 2 into the market as we have seen great results with patient experiences in both the U.K. and the Netherlands. The Libre 2 sensor, developed by our partner Abbott, is their most popular sensor, which expands our market potential. We believe there is a significant opportunity with Libre 2 users who might want to transition to an AID system like Omnipod 5, which is user-friendly and appealing to this demographic. We are eager to launch it and are pleased with the initial results. Regarding GLP-1 and ADA data, we will present additional information at ADA, including subset analysis from our pivotal trial and updates on our real-world evidence, which indicates that we consistently achieve excellent time in range with low hypoglycemia in larger real-world datasets. We will also provide further studies that have not yet been discussed. By ADA, we should provide an update on our GLP-1 analysis, highlighting that individuals who take GLP-1s are more likely to start insulin within the same year. We will back this up with comprehensive claims data, which is very promising.

Your next question comes from the line of Danielle Antalffy with UBS.

Congratulations on a strong start to the year. I have a quick question regarding new patient starts from competitive switches. Jim, you mentioned last quarter that one of your competitors was retaining their installed base more effectively. Has this situation worsened? With another competitive launch on the horizon, are they also becoming more protective of their installed base? How do you foresee this progressing? Should we anticipate an 85-15 split in competitive switches for MDI? I understand that MDI is crucial for growth, but I'm curious about your insights.

Yes, that's a great question, Danielle. The first point I want to make is that the 85-15 split represents a fairly subtle change in mix. We provide estimates on this, but we don't have complete visibility into the mix data for MDI compared to competitive T1 and T2 offerings. Therefore, I wouldn't place too much emphasis on the modeling in our reports since it was a subtle shift. That being said, I can’t comment on the challenges faced by our competitors in retaining their customer base. However, both our recent proprietary market research and third-party data indicate that we are clearly the net winners in the competitive switch scenario. Manufacturers often have a sense of how many customers they are converting from competitors, but they usually lack insight into their loss rates. We have implemented a market analysis to better estimate that. Since launching Omnipod 5, we consistently see that we gain significantly more customers than we lose, both in direct competition and overall in the market. This highlights our strong competitive position with Omnipod 5, which is clearly seen as the best offering in the market based on these results.

Your next question comes from the line of Bill Plovanic with Canaccord Genuity.

Just really wanted to go back to type 2 and Omnipod GO, and I don't know if I missed this. Did you give any detail on timing for full market release? And if not, are you kind of waiting for the O5 to be available before you roll out so you have a full product set? And then with the ATTD data with time in range on the AID, I was wondering if some of this data has been driving kind of a shift in the market there as well.

Thank you, Bill. We have not provided a timeline for Omnipod GO, and we have not filed for Omnipod 5 yet. The purpose of the commercial pilot is to ensure we gather enough insights to establish the appropriate commercial model. We are still determining how to launch the portfolio. While we have not updated the timing for Omnipod GO, it’s clear that a product portfolio will require a different commercial strategy compared to a single product. From the ATTD data, the real-world evidence we've demonstrated clearly shows that the Omnipod 5 algorithm is top-tier, delivering excellent clinical outcomes across various age groups and demographics. Moreover, our unique real-world evidence encompasses data from all patients using Omnipod 5, not just those who are highly engaged and regularly upload their data. The robust results we’ve obtained offer a comprehensive look at the entire user population. Additionally, our data indicates that we maintain a high time in range while keeping hypoglycemia rates very low, which is a significant competitive edge for us. This data is currently supporting our efforts in the field as we engage with physicians and introduce Omnipod 5 to new users, showcasing its clinical effectiveness alongside its user-friendly design.

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

I'll move away from the top line here and focus on margins. You had excellent operating margin again this quarter. I wanted to ask a little bit about the near-term cadence. Saw that you raised the guidance but also heard that you're expecting some incremental expansion of the sales force. So just any guidance on a quarterly cadence on that metric.

Yes, this is Ana. Thanks for the question. We're in a really strong position as we look at our operating margin. And I'll break it down. From a gross margin perspective, we did that 69.5%. That's very strong. We look to have strength on that as we progress through the year. Now from an operating perspective, what we need to balance out here is the investments because we want to really position ourselves into the future. And as Jim and I have talked, it is kind of a good problem to have. And we have a cadence around analyzing our investments and making sure there's that rigor of those returns. So as we sit here, yes, we see upward mobility here in our margins. And at the same time, we want to be prudent in our capital allocation to continue to fuel the growth, and as you mentioned here, the sales force and the different investments in our product and product features and other things. So it's a real balance, and we will continue to drive margins up as our priority and continue to prioritize our investments.

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

Jim, I wanted to understand your GLP-1 comment better. The thesis around GLP-1 use in type 2 is that it would help those patients take a couple of steps back on the disease progression escalator, if you will. So maybe the insulin use can be delayed, or if they're already on insulin, they can use less. And now you're talking about the transition to insulin use actually being accelerated. So do you think being on a GLP-1 is really making them more likely to need insulin? Or is what you're picking up there just that these patients were not engaging with their disease previously and now they are and GLP-1s are the catalyst to get them more active?

Yes, that's a great question, Chris. We would be speculating, but we will publish an update with more details soon. I don't want to take away from that, so you can refer to the slides for a better discussion. We have to rely on claims data for our analysis, which is substantial. It indicates that patients who start on GLP-1 are significantly more likely to also start insulin within the same year. Based on what we observe with GLP-1s, which effectively lower A1c levels, I think it aligns more with your second suggestion. Patients are put on GLP-1 because their A1cs are quite high. They may either discontinue GLP-1, which we will have more information on in our presentation, or they remain on it without resolving their A1c issue, leading to insulin use. This is evident in the claims data, but we can derive insights from this data about what is happening in clinical settings. Every patient's situation may vary, but at the population level, this is a distinct trend we see.

Your next question comes from the line of Mike Kratky with Leerink Partners.

This is Brett on for Mike. Just wanted to go back to the guide, I guess, on the high and the low end in particular. What are some of the assumptions in terms of just the G7 launch like? Does it take a certain time in the summer that that's going to launch to hit the high end of the guide or the midpoint of the guide? Or is there anything that we should be thinking about in terms of timing there? And then with that, just overall attrition and then the timing of the France launch as well, if there's any swing factors there in the OUS guide.

All right. There's a few questions here, and maybe we'll tag team here between Jim and I. Let me take the guide first. Listen, it goes back to the fundamental. First and foremost, we're increasing our revenue guide. Second point in terms of timing, we are absolutely assuming that as we put the new G7 pods into our channels, there's going to be a reduction of the G6 as it gets sold through the channel. So there is a destocking of that G6, and we have an assumption there, I'll call it, roughly in the $10 million or so. Now the timing of all of this is really hard to call. That's why as I get the question asked, I keep bringing everybody back up to the full year, the second half of the year. But that, I just wanted to clarify because it's been asked a few times, and that's really our underlying assumption. And I want to go back to your second question around international. Can you repeat that?

France launch.

So I'll start. As we've said, the timing of the France launch will be here over the summer. And the teams are ready. They worked out all the pricing, and they're working all the sales force and everything. So we expect, as we mentioned, that every country is slightly different. In France, there tends to be more of this four-year cycle of contract renewals as people might have been previously in pumps and so on. So we are assuming in our financials more of that uptick into the later half of the year, very like later into the year as it ramps and it takes time but really being a tailwind for us in 2025.

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

I wanted to just ask on the pharmacy channel. And so it's enjoyed exclusivity sort of getting patient access through their pharmacy benefit. Our team doesn't think there's really much risk to the current model reimbursement levels that insulin is achieving or securing. But are there any theoretical risk as some of the tubed pump competitors start to open up that channel for patients and just thinking about either reimbursement levels or just the model overall in terms of pump reimbursement into the pharmacy channel?

Thanks, Josh. Really, really good question, and it's something we could have a very complicated conversation about, right? But the very simple answer from our point of view is that what's unique about pharmacy access for Omnipod 5 is that the product fits the channel really, really well. And tubed pumps are durable equipment, and they don't fit the channel very well. So as anybody trying to enter the market and get into the pharmacy channel with some sort of durable equipment plus some consumable thing, it will be very difficult. From them to do it, they'll have to do with lots of workarounds. There's going to be reimbursement challenges. There's going to be scripting challenges and all kinds of things that we could have a much longer conversation about and never say never. We're very mindful of competition. We have a lot of respect for our competitors. But it's taken us several years to build out the scale and scope we have in pharmacy channel. And as we referred to in our prepared remarks, Omnipod 5 is available in retail pharmacy within 5 miles of 85% of the U.S. population. That is going to be very, very difficult for any of our durable pump competitors to replicate. And the overall model of Omnipod 5 with its very easy access, ease of use, ease of setup, get it in a box at the pharmacy where you get your insulin, that model just fits very, very well, and I think the durable pump model does not fit the channel well.

Thank you all so much for your questions. This does conclude our Q&A section. And I would like to turn the conference back to Jim Hollingshead.

Thanks, operator. In closing, we're off to a great start in 2024. We're transforming diabetes care globally with Omnipod 5, which now also includes our limited commercial launches with G7 in the U.S. and with G6 and Libre 2 Plus internationally. We've got a very strong market leadership position, the right product portfolio to address the needs of both the type 1 and the type 2 global markets and a clear and focused strategy to drive continued growth leveraging our significant competitive advantages. Looking ahead, the balance of the year is going to include a number of important milestones for us as we've been through on the call. We expect all of those milestones to help us drive new customer starts and margin expansion in the second half of this year and lay the foundation for significant long-term growth, all of that while continuing to deliver on our mission to simplify the lives of people with diabetes all over the world. I just want to thank the entire global Insulet team for your dedication and passion for our customers and for our mission. You're doing a great job, global Insulet team. Thank you very much. Thanks, everybody, for joining us today, and we look forward to updating you next quarter.

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