Mike Kratky

Mike Kratky questioned the confidence in a one-to-one handpiece sales to procedure ratio, given historical excess over three years implying substantial customer inventory, and asked for additional color on the cadence of OpEx and sales force expansion/SG&A throughout the year.

Answer

Larry Wood, Chief Executive Officer, reiterated that customers still need inventory but the incentive plans led to overstocking. Eliminating incentives has resulted in accounts carrying appropriate inventory based on usage. He cited several weeks of aligned sales and procedures, along with new systems requiring stocking orders, as reasons for confidence in the 1:1 modeling, confirming the field action had no impact. Kevin Waters, Chief Financial Officer, pointed to the EBITDA guidance, forecasting positive EBITDA in Q4, and estimated a Q1 EBITDA loss in the $20 million range, implying Q1 OpEx of $85 million-$88 million, with a detailed walk to be provided tomorrow.

Mike Kratky followed up on the confidence in the 1:1 handpiece to procedure ratio for 2026, questioning if customers still have substantial handpiece inventory to work through given past excess sales, and if the voluntary field action impacted this. He also asked for additional color on the cadence of operating expenses (OpEx) and sales force expansion/SG&A throughout 2026.

Answer

President and CEO Larry Wood reiterated that the field action had no impact on handpiece inventory. He explained that while customers need to maintain inventory, the elimination of bulk discounts has led to accounts carrying appropriate levels based on usage, rather than overstocking. He cited several weeks of data showing handpiece sales and procedures aligning 1:1, and noted that new systems installed in 2026 will also require stocking orders, reinforcing confidence in the 1:1 ratio. EVP and CFO Kevin Waters indicated that OpEx cadence implies positive EBITDA in Q4 2026, with an expected Q1 EBITDA loss in the $20 million range, translating to Q1 OpEx of $85 million-$88 million, with more details to be provided tomorrow.

An analyst on behalf of Mike Kratky of Leerink Partners asked about penetration in low-to-medium volume hospitals and the commercial impact of recent Medicare LCD updates.

Answer

EVP & CFO Kevin Waters responded that the near-term focus remains on high-volume hospitals where significant opportunity still exists. Regarding the LCD updates, he noted it is too early to see an impact as most changes become active in the fall, with any potential effect not expected until 2026.

Speaking on behalf of Mike Kratky, an analyst asked about the Q4 ASP guidance, probing for any potential discounting on legacy AquaBeam systems. He also inquired about the long-term cost of goods sold (COGS) for HYDROS compared to the legacy system.

Answer

CFO Kevin Waters confirmed the Q4 ASP guidance is for primarily greenfield accounts with no unusual discounting dynamics. On COGS, he stated that HYDROS currently costs about 10% more than AquaBeam but expects this to decrease with scale and eventually cost less. He emphasized that higher ASPs are more than offsetting this cost headwind, and the record Q3 gross margin of 63.2% serves as a new jumping-off point for future expansion.

Mike Kratky asked about the potential revenue contribution from prostate procedures in 2026, given the recent milestones of over 100 procedures and anticipated clinical activity later in the year. He also sought clarification on any BLA-related expenses impacting G&A in 2026, following the Q4 2025 impact.

Answer

Michael Dale (CEO) stated that prostate will not be a significant revenue contributor in 2026, as the company is maintaining discipline while awaiting clinical signals from the initial 10 clinical sites. He reiterated that any planned spend for prostate development is already captured in the current guidance, and a departure from the plan is unlikely before seeing positive clinical signals. Lindsey Hartley (CFO) confirmed that $1.9 million of the $7.2 million non-cash, one-time stock-based compensation expense related to the BLA approval in Q4 2025 was reflected in G&A, with no specific BLA expenses for 2026 mentioned beyond the Q4 2025 impact.

An analyst on behalf of Mike Kratky at Leerink Partners asked about any remaining major milestones in the BLA process before the expected September approval and requested details on the specific manufacturing improvements planned post-approval.

Answer

President and CEO Michael Dale explained that the final BLA stages involve working with the FDA on labeling and finalizing quality system requirements. Post-approval, he said manufacturing improvements will focus on classic continuous improvement processes, such as reducing process steps and implementing electronic systems to decrease manual record-keeping, which can begin once the BLA is secured.

Mike Kratky asked about the confidence in achieving double-digit renewal shipment growth in 2026, given that renewal opportunities are effectively flat compared to 2025, and inquired about any associated risks.

Answer

EVP and CFO Leigh Vosseller clarified that while new renewal opportunities in 2026 are flat compared to 2025, the double-digit growth in renewal shipments will be fueled by a tail of customers from 2025 (especially Q4) and some from 2024 whose warranties expired but have not yet purchased a new pump. She reiterated that the pharmacy opportunity will reduce reliance on driving renewal pump purchases, allowing customers to remain on supplies without timing concerns, and expressed strong confidence in the ability to grow renewal shipments.

Mike Kratky inquired about Tandem Diabetes Care's confidence in achieving double-digit renewal shipment growth in 2026, given that renewal opportunities are effectively flat compared to 2025, and asked about any associated risks.

Answer

EVP and CFO Leigh Vosseller clarified that 2025 renewal shipments were up well above 10%. For 2026, despite flat *new* opportunities, growth is fueled by a tail of customers from 2025 (especially Q4) and some from 2024, who are still within the 18-month capture window post-warranty expiry. She reiterated that the pharmacy model reduces reliance on driving renewal *pump purchases*, allowing customers to stay on supplies without timing concerns, and expressed strong excitement for the pharmacy opportunity.

Mike Kratky asked for quantification of the portion of claims that were rejected versus not, specifically for instances where MACs announced the removal of the 64568 code for OSA in December, and implants subsequently occurred in January.

Answer

Tim Herbert, Chairman and CEO, described the situation as 'all over the place,' with procedures paid on both 64568 and 64582, some denied and requiring clarification, and notifications of payment at 64568 followed by adjustments to 64582. He emphasized that the good news is now there is clarity on the code (64582 with -52 modifier), providing consistency for facilities and ASCs regarding reimbursement, and the next step is to minimize the professional fee reduction.

Mike Kratky asked for quantification of the portion of claims that have been rejected versus paid, specifically for procedures performed in January after MACs announced the removal of CPT code 64568 for OSA in December.

Answer

Tim Herbert (Chairman and CEO) described the claims situation as 'all over the place,' with procedures paid on 64568, 64582, some denied, and some adjusted. He emphasized that the good news is the newfound clarity on the code (64582 with -52 modifier) and consistent facility reimbursement, allowing the company to now focus on minimizing the professional fee reduction.

An analyst on for Mike Kratky at Leerink Partners asked about the progression of gross margin throughout the year as the Inspire V mix increases, given the significant inventory build. A follow-up question concerned the OUS performance and any foreign exchange impacts.

Answer

CFO Richard Buchholz reiterated the full-year gross margin guidance of 84% to 86% and confirmed that Inspire V is accretive to margins, excluding price changes. He explained that Inspire IV will continue to be manufactured for international markets pending approval, and many components are shared between the two systems. Regarding OUS, he noted no real FX impact in Q1 but is seeing some in Q2.

Mike Kratky followed up on the breakdown of price versus volume growth in U.S. Q3 numbers, asking to what extent Dexcom is anniversarying significant pricing headwinds from channel shifts and how this trend will continue into Q4 and 2026.

Answer

Jereme Sylvain, CFO, confirmed that the Q3 growth number reflects anniversarying channel mix issues from the previous year, leading to a 'narrowing' of the gap between unit volume and revenue growth. He expects this trend to continue in Q4 and 2026, with underlying unit volumes and revenue performance tightening up over the full year.

Mike Kratky asked about the breakdown of price versus volume growth in U.S. Q3 numbers, specifically if the company is anniversarying significant pricing headwinds from channel shifts, and how this trend will move forward.

Answer

Jereme Sylvain, CFO, explained that the Q3 growth number reflects anniversarying channel mix issues from the prior year, leading to a 'bit artificial' but higher growth rate. He confirmed a narrowing of the gap between underlying unit volumes and revenue performance, which is expected to continue into Q4 and 2026, despite potential lumpiness quarter-to-quarter.

Mike Kratky asked if the significant growth acceleration in the Cardiac Ablation Solutions (CAS) business puts the company on track to achieve its $2 billion annual sales target in fiscal 2026.

Answer

Chairman & CEO Geoff Martha confirmed the company is sticking to its near-term goal of adding an incremental $1 billion in revenue on top of its fiscal 2025 base for the CAS business. He clarified that while the goal is on track, it may extend into fiscal 2027, but reiterated confidence in the trajectory.

Sam, on behalf of Mike Kratky from Leerink Partners, requested more color on NeuroPace's ongoing dialogue with the FDA regarding the NAUTILUS trial submission. He also asked about the typical ramp-up time and learning curve for a community center in Project CARE to become a significant contributor to implant volumes.

Answer

CEO Joel Becker reported that the company's pre-submission documents for NAUTILUS were accepted by the FDA and a meeting is scheduled in the coming weeks, highlighting a collaborative relationship with the agency. Regarding Project CARE, Becker described three types of centers with varying ramp times: some are ready to start implanting quickly, others require more time to build out infrastructure or staff, and a third group prefers to focus on programming patients while partnering with Level 4 centers for the implant procedure.

Sam on for Mike Kratky asked for the underlying cause of biopsy growth outpacing implant growth in H1 2025 and inquired about the mix of newly trained MACI Arthro surgeons between existing and new customers.

Answer

CFO Joe Mara explained that the biopsy/implant dynamic was an expected part of the MACI Arthro launch, similar to the original MACI launch, and is a positive indicator for future growth. CEO Dominick Colangelo provided a detailed breakdown of the 600 trained surgeons, noting they are evenly split between two existing MACI user segments and one segment of prior non-users, demonstrating broad appeal.

Mike Kratky asked for additional color on the commercial impact of recent CGM integrations, both for Insulet's products and in the context of competitor launches.

Answer

President and CEO Jim Hollingshead described the sensor integrations as a 'terrific' growth tailwind. He highlighted the successful U.S. launch with Dexcom's G7 and the European launches with Abbott's Libre 2 Plus as material drivers of new customer starts. CFO and Treasurer Ana Maria Chadwick added that the strong uptake of the new iOS app further boosts their confidence in providing customer choice.