Earnings Call Transcript - PODD Q1 2026

Operator, Operator

Good morning, and welcome to the Insulet Corporation First Quarter Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Clare Trachtman, Vice President, Investor Relations.

Clare Trachtman, Vice President, Investor Relations

Good morning, and welcome to our first quarter 2026 earnings call. Joining me today are Ashley McEvoy, President and Chief Executive Officer; Flavia Pease, Chief Financial Officer; and Eric Benjamin, Chief Operating Officer. On the call this morning, we will be discussing Insulet's first quarter results along with our financial outlook for the second quarter and full year 2026. With that, let me start our prepared remarks by reminding everyone that we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Please refer to today's press release and our SEC filings, including our most recent Form 10-K and Form 10-Q for a discussion of these risks. We undertake no obligation to update any forward-looking statements. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Insulet's ongoing business performance, including adjusted gross profit, adjusted operating income, adjusted EPS, free cash flow and constant currency revenue, which is revenue growth, excluding the effect of foreign exchange. Reconciliations of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures are included in the accompanying investor presentation and are available in our earnings release issued this morning, both of which are available on our website. 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. During the Q&A session this morning, Ashley, Flavia, Eric and myself will be available to address any questions. Now I'd like to turn the call over to Ashley. Ashley?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Thank you, Clare, and good morning, everyone. We're pleased to report a strong start to 2026 with continued growth momentum, robust margin expansion and disciplined execution of the strategic priorities we shared at Investor Day. Our first quarter performance clearly reflects the opportunity in our large and underpenetrated markets, the strength of our differentiated technology and compelling clinical outcomes, the scalability of our recurring revenue business model, and the deep expertise and commitment of our teams around the world to finding a better way for people living with diabetes. We also made notable progress on our strategic priorities, which are to accelerate innovation that improves outcomes and unlocks new segments, develop our core markets as the category leader, strengthen our commercial capabilities, build a world-class team to enable our growth ambition, and leverage our financial strength to invest in and scale our business profitably. In the first quarter, we achieved 30% revenue growth, including 28% in the U.S. and 45% internationally. We continue to expand our customer base through new customer starts and enjoy strong retention and loyalty among our Podders globally. Leveraging our strong rent growth, we expanded adjusted operating margin by 110 basis points year-over-year. Adjusted EPS growth of approximately 40% was driven by our robust top-line growth and margin expansion and the benefit of our first quarter share repurchase. This performance reinforces our confidence in the financial growth algorithm we laid out last year and in our strategy to capture the significant opportunity ahead of us as the market leader and primary driver of category growth in the fast-growing global AID market. As a result, we are raising our full year 2026 total company revenue growth guidance from 20% to 22% to 21% to 23%. Flavia will share more details on our performance and outlook shortly. But let me first walk you through how we are developing our key markets, driving performance and advancing our strategic priorities. Starting with the U.S., our growth this quarter was strong, reinforcing our market leadership. We grew new customer starts year-over-year led by strong momentum in AID adoption for type 2 and benefited from positive pricing. We did experience greater-than-normal seasonality, which we believe was driven by the annual reset of deductibles impacting patient co-pays and co-insurance. These factors contributed to what appears to be a slower start to the year across the U.S. diabetes category. Improving month-on-month trends over the course of the quarter and into April suggests this was a temporary headwind, and we remain confident in our U.S. outlook for the full year. Our upcoming integration with the Libre 3 Plus sensor this quarter will unlock the benefits of Omnipod 5 for the nearly 450,000 people with diabetes currently using the Libre 3 Plus sensor. In U.S. type 1, we continue to extend our leadership and drive increased penetration with solid growth in our customer base, both annually and sequentially. Commercially, we are upskilling our sales force to strengthen our messaging about our clinical performance in the field, and we're deploying tools to optimize physician targeting and conversion while expanding reach and frequency. I remain confident in the opportunities to continue to move people with type 1 diabetes from MDI to AID and drive increased penetration. In U.S. type 2, we continue to expand the category and accelerate adoption from those using MDI. As expected, our type 2 customer base grew rapidly over the prior year. Supported by our prescriber education initiatives and the ADA guideline update, which established AID as the standard of care, we remain confident in the trajectory for U.S. type 2 AID adoption and in expanding our market leadership position. Notably, Omnipod's first-mover advantage gives us a head start in understanding the nuances of this market and in designing targeted initiatives to eliminate the barriers for adoption. For example, access and affordability are even more important for adoption in type 2 than in type 1. In fact, our ongoing efforts to increase access and remove prior authorization requirements generated a 4% net access improvement in the first quarter, benefiting an additional 16 million lives. We continue to see a vast opportunity to bring meaningful improvement in both clinical outcomes and quality of life to the millions of people with type 2 diabetes. Moving outside the U.S., our international business delivered another standout quarter, driving significant profitable growth and recording our third consecutive quarter of growth above 40%. We achieved 45% constant currency revenue growth supported by continued strong year-over-year and sequential growth and new customer starts, as well as positive price/mix from the ongoing conversion from DASH to Omnipod 5. We are generating robust growth across our largest and most established European markets including the U.K., France and Germany, all of which delivered strong first quarter new customer starts, driven in part by our focus on new prescriber activation. In the U.K., we achieved record new customer starts three years into our launch, reflecting the success of our strategy to deepen penetration internationally. We also continue to expand access and reinforce the value of Omnipod 5. In Canada, for example, we secured improved reimbursement and new coverage for Omnipod 5 across four provinces further fueling our growth. We now have reimbursement approval for 85% of the Canadian market. Looking ahead, we remain on track to launch Omnipod 5 in Spain in the second half of the year. Spain has more than 200,000 people with type 1 diabetes, a high rate of CGM adoption and one of the lowest levels of AID penetration in our European markets. And in the second half of this year, we plan to launch Libre 3 Plus in Germany and Canada allowing us to bring Omnipod 5 to new populations as Libre 2 Plus is not available with a pump in either of these markets. Critically, our rapidly growing scale internationally continues to drive operating leverage and significant margin expansion. Our strategy to deepen our penetration in our largest and most established markets is working, and our execution continues to exceed expectations. We continue to see the AID category expand globally. While our success is attracting competition, this further validates and raises awareness of AID and Omnipod, the most recognized brand in the category. We believe this dynamic is good for the category and good for Insulet. We are uniquely positioned to meet that worldwide demand at scale, and we are investing in accelerating innovation, strengthening our commercial capabilities, developing our markets, building a world-class team and scaling our global operations to ensure we continue to benefit disproportionately from category growth. Let me unpack these priorities further. Innovation remains the core driver of our growth strategy. Beginning with this year's launch of our second-generation algorithm coupled with our Libre 3 Plus sensor integration, and the broader rollout of Omnipod Discover, our new data insights platform. First, let me walk through the specific improvements behind the meaningful Omnipod 5 algorithm enhancements we're launching this quarter. Our simulated analysis switching the target glucose setting from 120 milligrams per deciliter to our new 100 milligrams per deciliter option delivered an approximately 5% improvement in time in range. This is better performance through a simple setting change with no added user burden. Additionally, we improved the algorithm performance so it now increases the amount of time users spend in automated mode with fewer interruptions during extended high glucose events. This has been a pain point for prescribers and Podders. We are pairing these two launches with an increased focus on clinical education to ensure prescribers understand the strong clinical efficacy and safety profile of Omnipod 5. Algorithm innovation will continue to be a key R&D focus. In fact, we are increasing investments this year to advance our next generation of products. We are making strong progress on our sixth-generation Omnipod paired with our third-generation algorithm, which is planned to launch in 2027. We are sharing data from STRIVE, our Omnipod 6 pivotal study at ADA in June, which will demonstrate continued improvement in automation and clinical outcomes. This gives us confidence in the durability of our market leadership. Next up is our transformative approach to unlock the type 2 diabetes segment. We are making progress on what we believe will be the first of its kind, truly fully closed loop system for people with type 2 diabetes. We're encouraged by the results from our feasibility study that we presented at ATTD, which highlighted 68% time in range with no boluses. I'm very pleased to share that just last week, we enrolled our first participant in EVOLVE, our pivotal study to support FDA filing next year and launch in 2028. These new product investments are designed to help us deliver better outcomes, enhance the user experience and unlock new market segments. Accelerating the shift to simpler, more intuitive insulin delivery and extending our leadership. We also recognize that as this category grows, innovation alone is not enough and we are investing in building a top-notch team and commercial capabilities to expand the AID market, fortify our competitive position and drive rapid adoption. As part of that effort, we recently appointed Mike Panos as Chief Commercial Officer to lead our global commercial organization. Mike brings a proven track record of building and scaling world-class sales teams, driving market expansion and delivering sustained double-digit growth across leadership categories. Our investments in our brand are also delivering unique commercial value. We have the most recognized brand in the category, which continues to bring in new users and generate traction with prescribers that our sales force doesn't actively target. We regularly activate our number-one brand to increase category and brand awareness. And this quarter, Omnipod's feature appearance on the TV show Scrubs was a resounding success at raising awareness and amplifying representation. After the show, our inboxes were flooded with stories about how meaningful and moving it is to see people with diabetes show up living their lives daily with ease. These moments also drive action like Michelle, who has type 1 diabetes and reached out to one of our support specialists online after watching the episode. Michelle had a prescription for Omnipod written three years ago, but never moved forward. With this nudge, we successfully reengaged her and got her started on Omnipod. Market development remains a top priority. In addition to the progress on market-specific initiatives that I highlighted earlier, we are seeing strong traction with our global KOL engagement and professional education efforts. We doubled the size of our U.S. peer-to-peer education program in 2025 and expanded it by more than 50% year-over-year this quarter. In Spain, we are investing in key opinion leader education well ahead of the launch to accelerate adoption. As I mentioned earlier, our efforts to improve access, secure new coverage and strengthen our value to payers are yielding tangible benefits to our growth and sustaining our market-leading U.S. coverage of over 90%. These efforts also support the maintenance of our preferred position in the pharmacy channel amid increasing competitive activity, which validates the value of our pioneering pharmacy pay-as-you-go model. Notably, based on the pricing activity we have seen in this channel to date, we continue to expect rational and disciplined pricing and rebate behavior. We remain focused on educating payers on the clinical and economic value of Omnipod to ensure broad high-quality access in all markets. Finally, scaling global manufacturing and operations continues to be a priority. We remain focused on quality, reliability and customer safety. Our team rapidly responded to execute the voluntary medical device correction in March and implemented targeted fixes for the applicable manufacturing process. Manufacturing disposable, sophisticated electromechanical devices at consumer scale and medical quality is a complex process. We continue to believe that our ability to meet the unique manufacturing demand of tubeless AID remains a source of strategic and financial advantage. We have market-leading gross margins driven by our ongoing manufacturing productivity improvements. We continue to ramp our capacity and automation investments in Acton, Malaysia and Costa Rica to support future growth. In summary, we are executing on each pillar of our strategy: accelerating innovation, developing our markets, strengthening commercial capabilities, building a world-class team and scaling global growth profitably. Omnipod continues to be the market leader and the disproportionate driver of AID category growth in the U.S. and abroad. Our investments are focused on extending our leadership by deepening differentiation across our platform while continuing to lighten the burden for people living with diabetes. Our strong results this quarter are a testament to the strength of our position, our execution and our attractive recurring revenue business model. I remain confident in our outlook for the year, our strategic path forward and our ability to deliver sustained profitable growth for shareholders and better outcomes for all of our Podders. With that, I'll turn the call over to Flavia.

Flavia Pease, Chief Financial Officer (CFO)

Thank you, Ashley, and good morning, everyone. As Ashley highlighted, the Insulet team delivered a strong start to the year. First quarter total revenues of $762 million increased 34% on a reported basis and 30% on a constant currency basis. And total Omnipod revenue grew 33% on a constant currency basis. In Q1 of 2026, our global customer base grew nearly 25% year-over-year, driven by increased adoption of Omnipod 5 across both the U.S. and international markets. Global new customer starts also increased versus the prior year period with growth both in the U.S. and internationally. MDI conversions continue to be the primary source of new customer starts, and we expect this to remain the case given the significant underpenetration across our core markets including U.S. type 1, U.S. type 2 and international type 1 diabetes. Globally, utilization and annualized retention rate remained similar to the prior year period. Now turning to our performance in greater detail. U.S. Omnipod revenue grew 28% in the first quarter, exceeding the high end of our guidance range. Driven by continued demand for Omnipod 5 across both type 1 and type 2. The quarter included a benefit of approximately $10 million in revenue related to the timing of certain distributor orders which we expect to be consumed in the second quarter. Excluding this impact, underlying U.S. revenue growth was approximately 26% coming in at the high end of our guidance. First quarter U.S. new customer starts increased year-over-year but declined sequentially. As Ashley noted, we attribute the sequential decline to seasonality, driven by the annual reset of deductibles which impacts patient co-pays and co-insurance. This effect was less evident in 2025, given that we were in the earlier stages of the type 2 launch. Importantly, we saw U.S. new customer starts ramp through the quarter, and that momentum has continued into the second quarter. International Omnipod strength continued in the first quarter with revenue growth of 59% on a reported basis and 45% on a constant currency basis. Volume remains the primary driver of international Omnipod growth supported by customer expansion across both established and newly launched markets, along with favorable price/mix benefits from the transition of DASH. Continuing down the P&L, our first quarter GAAP gross margin was 69.5%, and included approximately $12 million of expenses associated with our medical device correction. Our adjusted gross margin was 71%, down 90 basis points year-over-year. During the quarter, we incurred some increased excess and obsolescence costs as we transition to new pod configurations that position us to support Libre 3 Plus sensor integration and upcoming algorithm enhancements. These costs negatively impacted adjusted gross margin by more than 150 basis points. After adjusting for this impact, gross margin performance in the quarter was driven by strong top-line growth, continued manufacturing productivity gains and positive pricing. Turning to OpEx. We continue to invest with intention to both maintain and extend our leadership while remaining disciplined in how we deploy capital. During the quarter, we ramped R&D investments to support our innovation roadmap and advanced key clinical development programs, including Omnipod 6 and fully closed loop for type 2. These investments position us to continue delivering meaningful innovation over the long run. We also increased SG&A investments as we continue to prioritize market development initiatives to unlock AID penetration and demand generation efforts. We expect to continue ramping investments in sales and marketing as we expand our sales force during the second quarter and prepare for upcoming product launches including Libre 3 Plus integration and our latest algorithm enhancements. These investments expand our commercial capacity, broaden HCP coverage and enable us to drive additional new customer starts. First quarter adjusted operating margin expanded 110 basis points to 17.5%, driven by strong top-line growth and SG&A leverage. Our financial strength allows us to continue to invest for future growth while delivering margin expansion. First quarter net interest expense was $9.8 million, an increase of $11 million primarily driven by our prior year debt refinancing activities and lower interest income. Our first quarter adjusted tax rate was 19.8%, reflecting a benefit from U.S. R&D tax credits and a favorable mix of earnings. First quarter adjusted EPS was $1.42, up approximately 40% from $1.02 in the prior year period. We are well positioned to continue driving strong earnings growth reflecting the strength of our durable recurring revenue model, our compelling top-line trajectory and the operating leverage we are generating. Turning to cash and liquidity. During the quarter, we repurchased approximately 1.25 million shares for $300 million. We ended the quarter with $480 million in cash and the full $500 million available under our credit facility, and we generated approximately $90 million in free cash flow in Q1, reflecting our strong operating performance in the quarter. Now turning to our outlook for the second quarter and full year 2026. For the second quarter, we expect Omnipod revenue to grow 21% to 23% and total company revenue to grow 20% to 22%. On a reported basis, foreign currency is expected to contribute approximately 100 basis points of benefit to both growth rates. In the U.S., we expect Omnipod revenue growth of 18% to 20%. This guidance reflects approximately $10 million of revenue that shifted into the first quarter creating a 200 basis point headwind to second quarter growth. Internationally, we expect Omnipod growth of 28% to 30%. While growth remained strong, as we discussed last quarter, we expect the pace to moderate as we anniversary successful launches from last year. On a reported basis, foreign currency is expected to provide a favorable impact of approximately 200 basis points on international growth. Turning to our full year 2026 outlook. We now expect total Omnipod revenue growth of 22% to 24% and total company revenue growth of 21% to 23%, reflecting our strong start to the year. We expect foreign currency to provide a favorable impact of approximately 100 basis points for the full year. For U.S. Omnipod, we continue to expect our revenue to grow 20% to 22%. We expect year-over-year growth in U.S. new customer starts for the year, positive pricing and similar utilization trends. We do expect retention rates to decrease modestly as our type 2 customer base continues to grow, which is why we're investing in programs focused on improving onboarding, engagement and long-term retention. For international Omnipod, we now expect 2026 revenue to grow 26% to 28%. On a reported basis, we expect a favorable impact of approximately 300 basis points from foreign currency. We expect year-over-year growth in international new customer sites for the year as we penetrate further in current markets and expand Omnipod 5 into new markets. Omnipod 5 is now available in 19 countries, and we will continue to broaden our reach and plan to enter Spain in the second half of 2026. While volume remains the primary driver of our international revenue growth, our guidance also reflects a benefit from positive price/mix realization as customers continue to transition from Omnipod DASH to Omnipod 5. Overall, our international growth guidance assumes similar utilization levels and improved retention for 2026 relative to 2025. Turning to 2026 operating margin. We continue to expect approximately 100 basis points of operating margin expansion for the full year driven by strong top-line growth and ongoing gross margin expansion while funding a meaningful step-up in R&D and continued investments in sales and marketing, offset by leverage in G&A. I would note, this outlook reflects the E&O costs we absorbed in the first quarter as well as incremental raw material and shipping costs driven by the ongoing conflict in the Middle East. Looking at a few items below our operating income. We expect 2026 net interest expense to total approximately $40 million, an increase of approximately $15 million primarily due to lower interest income. We now expect our 2026 non-GAAP tax rate to be in the range of 21% to 22%, reflecting the lower Q1 tax rate, favorable mix of earnings and improved utilization of foreign tax credits. Based on these factors, we continue to expect adjusted EPS to increase by more than 25% in 2026. We expect free cash flow to be approximately flat from 2025 levels, supported by robust growth and continued margin expansion, partially offset by a ramp-up in capital expenditures to support our continued global manufacturing expansion plans. To close, we're executing against a clear framework focused on delivering top-tier growth, margin expansion and increasing free cash flow. This approach underpins durable long-term value creation while enabling us to expand access to Omnipod for people living with diabetes worldwide. With that, operator, please open the call for questions.

Operator, Operator

Our first question comes from David Roman from Goldman Sachs.

David Roman, Analyst (Goldman Sachs)

Maybe I'll start with a strategic one and then go on to the financials. Ashley, I think you've been in the role now just about a year. Maybe you could help frame the past year, some of your observations here. What's gone in line with your expectations? What's gone better? Where are the areas where you're focused? And how are you kind of framing Insulet now that you've been in the role 12 months?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Yes. Thank you, David, for joining. I was just last week marking my one year, and I would say that I'm absolutely more confident now in Insulet's potential than a year ago. You know us really as this high-growth medtech innovator doubling revenue over the past couple of years. First and foremost, we're focused on preserving what makes us so special: our remarkable culture, patient focus, entrepreneurial spirit, and strong competitive moats, and then enhancing our capabilities to continue to scale the business. Let me share some areas we've focused on as a team to unlock more value. First is innovation — doing things in parallel and at pace to continue our role as the tech leader. For example, being first to integrate day-one with sensors like the Dexcom 15 and with Abbott's upcoming dual-analyte sensor, and delivering multiple algorithm improvements. Second is international — driving profitable growth globally by going deeper in core markets that matter most versus going broader at this stage. The U.K. is a great example: several years into the Omnipod 5 launch, this quarter we posted record new customer starts. Third is our commercial engine — being known not just as a tech leader but as a commercial engine. We have expanded our sales force twice in the past 12 months and are upskilling our team to sell clinically. Fourth is strengthening our foundation on operations as we scale globally. Costa Rica is a good example; we laid the groundwork this quarter and expect to be live in 2029. And obviously, it's all about people. There was a remarkably talented team here when I arrived, and we've supplemented it with leaders who have run bigger organizations and know how to scale. Collectively, these initiatives position us to pursue our ambition to continue driving category growth, serve more Podders and increase our earnings power. You had a second question, David?

David Roman, Analyst (Goldman Sachs)

Yes. I appreciate all the perspective there, and that does kind of segue to my second question. If you take kind of Q1 performance and the second quarter guidance into consideration, the outlook implies kind of high teens growth in the back half of the year. Can you help us unpack that a little further on a geographic basis and your confidence in the 20% long-range growth guidance as you exit 2026 potentially below that level? And maybe there's some conservatism in the outlook given the timeline where we are in the year?

Flavia Pease, Chief Financial Officer (CFO)

David, it's Flavia. I'll take that one. Yes, the midpoint of the guidance will imply second half growth in the high teens. First, we're still seeing very strong performance in both the U.S. and internationally, and we just raised our guidance for international and the total company. Between the regions, last year there were different comp dynamics, and that plays a role in first-half versus second-half comparisons this year. Internationally, we will continue to see a favorable impact from price/mix realization, but it will moderate as we increase penetration of Omnipod 5 in our markets. When you look at dollars of growth rather than percentage growth, at the midpoint of our guidance for the full year we're in line with the same dollar growth delivered last year. Currency also plays a role — it provided a tailwind in parts of 2025 and again a tailwind in the first half of 2026, which smooths the half-to-half comparison. Importantly, regarding sustainability of the 20% long-range target, we feel very confident. The innovation and commercial catalysts planned will support it: Libre 3 Plus expands our TAM by about 450,000 people, we have algorithm enhancements this year, Omnipod 6 next year, and fully closed loop in 2028. Commercially, the sales force expansion this quarter will have a fuller benefit next year. Internationally, Libre 3 Plus launches in Germany and Canada will expand our serviceable market where Abbott sensors aren't available. We will continue to execute on increasing access; for example, we expanded coverage in additional Canadian provinces this year and launched in the Middle East and plan to enter Spain in the second half. These combined innovation and commercial levers underpin our confidence in sustaining the 20% growth target.

Operator, Operator

Our next question comes from Robbie Marcus from JPMorgan.

Robert Marcus, Analyst (JPMorgan)

I want to follow up on that last question. Flavia, as we think about similar dollar growth this year, that does imply deceleration as the sales base gets larger, and you did mention you're going to be exiting sub-20% in the U.S. in the second half of this year. So I think the question a lot of investors have is, how do you maintain that 20% growth rate over the long-range plan if you're decelerating into year-end and dollar growth is not increasing year-over-year? Maybe fill us in on the gaps about 2027 and how that improves? And then I have a follow-up.

Flavia Pease, Chief Financial Officer (CFO)

So Robbie, going back to what I just articulated, we will continue to drive the 20% with the innovations that we're launching. In 2027, we do have Omnipod 6 and the full benefit of the sales force that we're expanding this year, which will be a tailwind.

Ashley McEvoy, President and Chief Executive Officer (CEO)

I think what's helpful is our philosophy for setting guidance. A year ago, we refined our strategic plan and prioritized a portfolio of growth opportunities, which strengthened our conviction in the untapped market opportunity — the high TAM and low penetration Flavia described — and our proven ability to unlock that growth. That led us to raise our ambition at Investor Day and set targets accordingly. Our goal is to outperform, and our Q1 results reflect that momentum and give us confidence in our commitments.

Robert Marcus, Analyst (JPMorgan)

Great. Maybe a quick follow-up. You talked about a slowing market on seasonality and new patient starts in the first quarter. I guess two parts. One, what do you think the market grew? I know it's hard to answer without everyone else's reporting yet, but what do you think it grew? Why was it more seasonal than usual? And how do you think your new patient starts U.S. and outside U.S. did in the first quarter?

Ashley McEvoy, President and Chief Executive Officer (CEO)

I don't have full market numbers, but I would say 2024 and 2025 were years of accelerated growth compared to prior years, and we're encouraged by the continued momentum. Q1 started off slower due to higher-than-normal seasonality, which we attribute to the reset of deductibles and potentially transitions in the insurance landscape. Sequentially, every month improved through the quarter, and we felt strong coming out of April into Q2. We do not believe the medical device correction had an impact on new customer starts in the quarter; the slower start was primarily seasonal.

Operator, Operator

Our next question comes from Travis Steed from Bank of America.

Travis Steed, Analyst (Bank of America)

I wanted to ask about the type 2 retention comps. Just curious what you're seeing there and why you called it out as slowing. When you think about the type 2 opportunity, is the next five to ten points of the penetration curve going to be harder to get than the first few points you achieved over the last year? How is the type 2 ramp going?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Our type 2 momentum remains strong. New customer starts in type 2 grew meaningfully year-over-year in the quarter despite the Q1 seasonality. We are still in the early innings — roughly 5% penetration and about 55% CGM adoption in the type 2 population — and we're preparing for a transformative launch with our fully closed loop system designed to be truly plug-and-play: no bolus, no user interaction, no settings. That design is intended to unlock the primary care physician audience and make the experience highly consumer-friendly, which we believe will accelerate penetration in a large TAM of people with type 2 on insulin.

Travis Steed, Analyst (Bank of America)

And what about the retention piece?

Ashley McEvoy, President and Chief Executive Officer (CEO)

We have healthy retention overall and are not seeing meaningful year-over-year deterioration in aggregate. We're learning the type 2 patient journey and are innovating our customer experience model, especially early onboarding and support, to improve early retention. On a total company basis, our retention remains about 90%.

Eric Benjamin, Chief Operating Officer (COO)

To build on Ashley's comments, utilization for type 2 customers is stable and similar to type 1. The retention drop-off has been most apparent early in the patient journey as people get accustomed to wearing the product. We're learning and evolving our model to better onboard and support these customers so they stay successful long term.

Flavia Pease, Chief Financial Officer (CFO)

Travis, to add, the modest deterioration in U.S. retention as we expand into type 2 was expected and is consistent with the different characteristics of that population. Internationally, retention has improved as we've launched in additional markets. On a consolidated basis, retention remains stable.

Operator, Operator

Our next question comes from Larry Biegelsen from Wells Fargo.

Larry Biegelsen, Analyst (Wells Fargo)

I'll keep it to one, Ashley, and try to ask the competition question a little differently. We understand you believe it will be hard for competitors to manufacture and ramp to this pump, but you're not saying there won't be any tubeless competition in the future. So as your share of tubeless pumps declines from 100% today — which mathematically has to happen if there's competition — what offsets that to maintain your 20% growth goal? Is it faster overall pump market growth, a greater shift from tubed to tubeless pumps, or both?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Thanks, Larry. The key point is this is not a market share trading exercise; it's about expanding the category and bringing new people into it. We are the market leader and expect to sustain share leadership. We also intend to maintain tech leadership — next year we'll be on our sixth-generation Omnipod while others may be launching their first. Tubeless solutions have been hard to develop historically, underscoring manufacturing complexity. We have mastered developing and manufacturing at scale, which gives us cost and scale advantages and earnings power to keep growing. When new entrants enter, awareness rises and the category expands. For example, four years ago roughly 60% of AID patients migrated from MDI; that number is now about 80%. So the category continues to grow as we attract more MDI users into AID.

Operator, Operator

Our next question comes from Matthew O'Brien from Piper Sandler.

Matthew O'Brien, Analyst (Piper Sandler)

I'll ask two. First, you've got a bunch of new competitors in the pharmacy channel. I want to make sure there wasn't any disruption early in the quarter as they pushed in the pharmacy channel that made it more difficult for you to get patients through pharmacy, which might explain the softness. Second, there's a lot of investor concern around the recall. Can you frame up what you're seeing in the marketplace or from customers in terms of the medical device correction and the impact it's had on the business and the ability to add new patients?

Ashley McEvoy, President and Chief Executive Officer (CEO)

First, in Q1 we don't think pricing pressure impacted performance. U.S. pricing for us was positive in Q1 and we expect that to continue. The rebate behavior and pricing activity we've seen in the pharmacy channel has been rational and disciplined, not aggressive discounting. We prioritize durable, high-quality access and broad affordability and will not trade long-term value for short-term positioning. Our volumes are multiples larger than the nearest competitor and we remain the number-one prescribed and requested brand, which supports pricing. On the field action, our recent voluntary medical device correction in March was a difficult moment, and patient safety is our top priority. We routinely monitor and investigate customer complaints. Our team responded rapidly to the correction and implemented targeted fixes. We do not believe the correction affected new customer starts in the quarter; the slower start was primarily due to Q1 seasonality and deductible resets. Last week, the FDA updated its communication, which created confusion around misreported MDRs as SAEs; we're unhappy about that. No additional adverse events from the correction have been reported since our April 10 update. Manufacturing sophisticated disposable electromechanical devices at scale is complex; risks cannot be totally eliminated, but what matters is how issues are identified and addressed. We addressed this early, implemented corrective actions, and will continue to invest in quality systems and operating controls.

Operator, Operator

Our next question comes from Jeff Johnson from Baird.

Jeff Johnson, Analyst (Baird)

Ashley, you said net pricing was up in the U.S. in 1Q. I want to confirm that's net of rebates, not a WAC comment. It sounds like you're expecting that for the year as well. As we model next year, would you still assume flattish pharmacy pricing in the U.S. over the next couple of years, or should we assume pricing remains positive?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Jeff, consistent with our Investor Day messaging, we expect pricing to be positive over the next three years. Q1 is a data point and we expect positive pricing to continue in full-year 2026. This reflects the strength of the clinical and economic value proposition of AID for payers and pharmacy benefit managers.

Flavia Pease, Chief Financial Officer (CFO)

To clarify, Jeff, the comment on pricing was not a WAC comment.

Operator, Operator

Next question comes from Jayson Bedford from Raymond James.

Jayson Bedford, Analyst (Raymond James)

On the Q2 international growth guide, it implies a bit more deceleration than I would have thought given a very strong Q1. Comps aren't that different. Is there any stocking impact in Q1 that may be related to some of the new international countries? And outside of the comp, what weighs on Q2 international growth?

Flavia Pease, Chief Financial Officer (CFO)

Jayson, while price/mix realization will continue to be positive internationally, the pace will moderate a bit as we anniversary some strong launches and the installed base continues to evolve from DASH to Omnipod 5. Dollars of growth will continue to increase sequentially quarter-over-quarter on a constant currency basis, but the growth rate will moderate due to those anniversary dynamics.

Operator, Operator

Our next question comes from Shagun Singh from RBC.

Shagun Singh, Analyst (RBC Capital Markets)

I have a quick follow-up. The $10 million in revenue that shifted into Q1 — can you elaborate on the nature of that? And Ashley, on the commercial front, you're strengthening messaging around algorithm improvements and time in range and calling out three algorithm launches over three years. How meaningful are those upgrades, and what's the pace of the U.S. sales force expansion? Should we expect continued expansion throughout 2026?

Ashley McEvoy, President and Chief Executive Officer (CEO)

The roughly $10 million was related to distributor order timing that actualized in Q1 and will be consumed in Q2. Regarding commercial investments, our field team is our largest line item and we're investing to upskill reps to sell clinically in addition to our form-factor differentiation. We've retrained and retested our representatives and are expanding call points with improved targeting and segmentation to broaden reach and frequency. Reps are now discussing optimized settings, including the new 100 mg/dL target option and algorithm improvements that increase automated mode time. We're integrating with Libre 3 Plus, which brings a substantial population of CGM users into our addressable market. We've also significantly increased our peer-to-peer and professional education efforts — expanding events and KOL engagement to ensure clinicians understand the clinical performance. Finally, our brand continues to create pull; cultural moments like the Scrubs feature drove direct engagement and reactivated potential patients. We will continue to invest in the sales force this year, with the fuller benefits realized next year.

Operator, Operator

Our last question will come from Matt Taylor from Jefferies.

Matthew Taylor, Analyst (Jefferies)

On the tailwinds you called out for 2027, specifically Omnipod 6, do you expect that launch to drive increased share gains and customer starts, or could you also get price/mix benefits from Omnipod 6?

Ashley McEvoy, President and Chief Executive Officer (CEO)

Omnipod 6 is the next step in our evolution and is designed to extend our leadership and continue building the category by bringing people in from MDI. It includes our third algorithm improvement and is designed to increase automation, reduce required bolusing and minimize user interactions to make it simple for new users. We're sharing STRIVE data at ADA in June which will demonstrate clinical performance improvements. Omnipod 6 also has improvements in over-the-air updates and flexibility for wearing on multiple body sites, and we're moving to a single-pod chassis which simplifies prescribing — one script regardless of sensor — and simplifies the supply chain. These features are designed to drive customer starts and broaden appeal; we expect meaningful commercial benefit and contribution to our growth algorithm next year. Thank you for the question, Matt. Let me just thank everybody for your questions and engagement. We are very encouraged by the momentum of the business and look forward to updating you on our continued progress. Thanks so much.

Operator, Operator

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