Insulet - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue rose 32.9% to $649.1M, beating consensus (~$612.3M*) and exceeding guidance; adjusted EPS was $1.17 vs. ~$0.92* consensus; GAAP EPS was $0.32, impacted by debt extinguishment and tax items.
• Omnipod strength across geographies: U.S. Omnipod revenue up 28.7% to $453.2M; International up 45.0% to $185.8M (38.8% cc), with price-mix tailwinds as users shift from DASH to Omnipod 5.
• Gross margin was 69.7% (down sequentially vs. Q1’s 71.9% but +190 bps YoY); adjusted operating margin expanded to 17.8%, and adjusted EBITDA margin to 24.3%.
• Guidance raised: FY25 total revenue growth to 24–27% (cc), U.S. Omnipod to 22–25%, International to 34–37%, adjusted operating margin to 17.0–17.5% (from ~16.5% prior) — a clear positive catalyst.

What Went Well and What Went Wrong

What Went Well

• Record quarter driven by broad-based demand; new customer starts grew YoY and sequentially in U.S. Type 1 and Type 2 and International; “We grew 31%…with $649,000,000 of revenue…record number of people on pod” — CEO Ashley McEvoy.
• Type 2 momentum: over 30% of U.S. new starts were Type 2; strong clinical outcomes (SECURE‑T2D, RADIANT) underpin adoption; CFO: “over 85%…came from MDI and over 30% were Type two”.
• International acceleration: Omnipod 5 conversions ~50% of base (vs. ~40% last quarter), with low double-digit price‑mix realization contribution to growth.

What Went Wrong

• GAAP EPS fell to $0.32 (vs. $2.59 prior year) due to $84.4M loss on extinguishment of debt and tax items; adjusted EPS improved to $1.17 (vs. $0.55 YoY).
• Gross margin moderated sequentially to 69.7% (Q1: 71.9%) amid ~$10M inventory-related charges tied to legacy component write-offs during migration to Omnipod 5; FX also a ~30 bps pressure Q/Q.
• Drug Delivery revenue remains small ($10.2M) and FY25 outlook implies declines; Q3 guide: (80)%–(75)% YoY; FY25: (30)%–(25)%.

Transcript

Speaker 1

Good morning, ladies and gentlemen, and welcome to the Insulet Corporation's second quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, June Lazaroff, Senior Director, Investor Relations.

Speaker 2

Good morning, and thank you for joining Insulet's second quarter 2025 earnings call. With me today are Ashley McEvoy, President and Chief Executive Officer, and Ana Maria Chadwick, Chief Financial Officer. Also joining us for the Q&A portion of today's call is Eric Benjamin, Chief Product and Customer Experience Officer. Both the replay of this call and the press release with our quarterly results and guidance will be available on the Investor Relations section of our website. We also included supplemental information, which can be found within Insulet's corporate presentation on our website. 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 will also discuss non-GAAP financial measures with respect to our performance, including adjusted operating income, adjusted EBITDA, adjusted tax rate, 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 % 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 will turn the call over to Ashley.

Speaker 4

Thanks, June, and good morning, everyone. As of yesterday, I have 100 days under my belt. I visited our top four markets in all three shifts in our active manufacturing operation. I met with physicians in the field and at the ADA. I've listened to our team, partners, healthcare providers, investors, analysts, and most importantly, our loyal podders. The welcome by Team Insulet and the diabetes community has been warm and gratifying, and I'm eager to share insights and priors with you this quarter. First and foremost, our results this quarter reflect our attractive position as a differentiated, durable growth company in a large, underpenetrated market. We grew 31%, surpassing the $600 million mark for the first time, with $649 million of revenue, and continue to be highly profitable and cash flow positive. We achieved this by getting a record number of people on pod.

We drove both year-over-year and sequential growth in new customer starts across all of our strategic growth areas: U.S. Type 1, U.S. Type 2, and International. This reflects Omnipod 5's unique consumer appeal and strong clinical outcomes, as well as solid prescriber growth and commercial execution. We delivered this growth while generating strong adjusted operating margin expansion for the quarter. Based on these robust results, we are raising full-year guidance for revenue growth and adjusted operating margin, which Ana will walk you through. For now, let me turn to some observations from my first 100 days. First, I've been incredibly impressed by the passion and commitment of our Insulet team and how that energy has been channeled into the product and into the community.

Everyone here cares deeply about revolutionizing diabetes management, and that intense focus has earned Insulet a unique and advantaged position at the nexus of consumer health, med tech, and health tech. Going back to Insulet's origins as a groundbreaking insulin management system for children, the company has innovated to improve clinical outcomes and transform patients' lives. Omnipod created the market for modern insulin delivery and has built an entirely new category. Patients see us as a pod, not a pump. We continue to lead the market with truly differentiated technology. Omnipod 5 is an engineering marvel, a complex medical device that is simple to use and delivers great outcomes. For patients, it's an insulin delivery experience in a class by itself. Omnipod's advantages shine through in clinical evidence.

We have a large and growing body of randomized trials and real-world evidence underscoring our strong clinical outcomes across Type 1 and Type 2 diabetes. At the ADA in June, we highlighted Omnipod 5's robust results from Secure T2D, our pivotal trial in Type 2 diabetes, including a 0.8% reduction in A1C and a 20% improvement in time in range. Additionally, it showed that Omnipod 5 patients used 29% less insulin and experienced minimal weight gain and lower hypoglycemia versus other therapies, all key clinical considerations for physicians evaluating Type 2 diabetes treatments. Results like these are a key factor driving adoption and the tremendous growth in our prescriber base. Today, more than 25,000 healthcare providers are prescribing Omnipod 5 in the U.S. This is up approximately 20% from last year and continues to grow.

My conversations with podders and physicians have also reinforced that customer experience and clinical outcomes go hand in hand. The unique simplicity of Omnipod 5 brings people to our platform who saw themselves as too old for advanced technology or who felt ashamed to be using a medical device. Jack, a 91-year-old veteran in Baltimore, discovers that a pod is easier than injections and now lives with less hypoglycemia. Samantha, a teenager from Tampa, has started to go to sleepovers and wear dresses again, thanks to the discretion of Omnipod and the ability to control it with her phone. We celebrate this broad impact and continue to invest in making Omnipod even better. Orchestrating a superior end-to-end experience for podders has required us to devise and invest in thoughtful solutions across our business. Over the past decade, we've invested more than $1 billion in manufacturing capabilities.

We have pioneered advanced automation in our plants and built a robust and secure global supply chain to deliver tens of millions of complex electromechanical devices per year at medical standards. Insulet's proprietary tooling, equipment, and processes enable a sustainable cost advantage. Similarly, for patient access, eight years ago, Insulet began building critical payer relationships and negotiating pharmacy channel distribution in the U.S. to make Omnipod available where patients pick up their insulin. Today, our near 100% pharmacy model and unique Medicare Part D coverage make Omnipod easy to find and easy to afford. You can get an Omnipod at more than 47,000 pharmacies in the U.S., often for just $1 per day. Importantly, we earn our customers' business essentially every three days with our pay-as-you-go model. Our infrastructure is different than that of traditional pumps because Omnipod is different.

Together, these advantages have given rise to a community unlike any other I've seen during my 30 years in healthcare. Omnipod has grown into a beloved grassroots brand fueled by Podders' word of mouth and advocacy. In the U.S., Omnipod is the most prescribed and most requested AID system. It is also number one in new customer starts in the U.S. and the EU. Our more than 500,000 Podders are passionate and engaged R&D partners with a deep interest in continuously enhancing our products for the benefit of everyone with diabetes. Building off of this grassroots base, we have a tremendous potential to broaden our reach, become an iconic world-class brand, and grow faster with targeted and compelling marketing strategies to reach distinct segments of Type 1 and Type 2 patients. In sum, I'm even more confident than I was 100 days ago in Insulet's unique strength and exciting future.

We have a strong brand, engaged customers, differentiated technology backed by clinical outcomes, and a durable recurring revenue business model, all operating in a large, unpenetrated market. We have best-in-class technology, manufacturing, and patient access that we have used to create a category of one. We have a rich data ecosystem that is driving a virtuous cycle of smarter products and better outcomes. There is tremendous opportunity ahead. Last quarter, I emphasized that our strategic objectives are intact. That is still the case. As you can see from the results this quarter, we are executing well against these objectives. We continue to expand our lead in U.S. Type 1, driven primarily by new prescribers and new patients. The seamless expansion of our U.S. sales team has been and will continue to be a key priority as we further strengthen and scale our commercial operations.

Our progress on this front has accelerated our momentum in the marketplace and contributed to our strong new customer starts. We are driving adoption as the first mover in U.S. Type 2. We are in the early stages of creating the market, learning rapidly, and honing our approach. Type 2 new customer starts accelerated in the quarter. I'm encouraged by the strong conversion from MDI and the positive response from early adopters. Customer satisfaction is high, and we are seeing remarkable outcomes. Endos with Type 2 patients who have been reluctant to give themselves an insulin shot are seeing results with Omnipod 5 that mirror our Secure T2D outcomes, meaningful improvement in A1C, and improved glycemic control. We are growing durably and profitably outside the U.S. Our international business posted nearly 40% year-over-year growth and accounts for approximately 30% of our revenues.

Our revenue base is concentrated in the UK, France, and Germany, where we still have room for further penetration. Omnipod 5 launches in these markets have gained strong adoption and driven positive price mix realization. We have an immense opportunity to continue growing at attractive margins. Finally, we are investing in platform innovation as we maintain and expand our technology advantage. This includes our next-generation hybrid closed-loop algorithm in the STRIVE pivotal study and a fully closed-loop algorithm designed specifically for Type 2 diabetes in our Evolution2 and Simple Use feasibility studies. We are also advancing our integration with the latest sensors. G6, G7, and Libre 2+ have launched, and Libre 3+ is coming in 2026. In June, we were excited to fully launch our iOS app compatible with G7. This integration represents a major milestone in our commitment to providing our customers more choices with fewer devices.

Getting podders to use their phone versus controllers typically yields benefits to engagement, retention, and outcomes. While we have seen rapid adoption of our iOS and Android app, we still have approximately 55% of eligible U.S. podders still predominantly using their controller. We have considerable upside as app use grows and we expand our integrations. Looking ahead, my focus now is determining how we build on our strengths and further scale this incredible business for even greater global impact. We are seeking to move faster, deepen our advantages, drive penetration, raise margins, and open new opportunities. I'm still learning, but already see four areas we'll be working on. First, enhancing commercial capabilities. We have earned a place as market leader and can now sell our clinical outcomes and experience advantages as well as our unique form factor.

Second, building the power of our brand globally and strengthening our direct-to-consumer capabilities to accelerate demand generation and market development. This is a key opportunity across all of our markets. Third, driving global scale both operationally and financially. As market leaders and market shapers, we can strengthen our local market presence outside the U.S. to grow faster and expand our margins. We'll invest in market development capabilities, commercial excellence, and top talent to accelerate market penetration. Finally, we'll accelerate the pace of innovation. We will ensure we are earlier on next-generation sensor integrations, invest in technology to modernize the customer experience, and improve retention and patient outcomes. We're also pushing our limits and thinking expansively about our strategic ambition and longstanding focus on solving unmet patient and clinical needs. We look forward to sharing more at our upcoming Investor Day on November 20th in Acton, Massachusetts.

Before I close, I would like to thank the Insulet team for their hard work and commitment this quarter. This record performance would not be possible without your efforts. I count myself fortunate to have joined this team and this business. With our highly differentiated technology platform, we have a unique opportunity to improve lives for millions of people with diabetes, to scale profitably in a large and underpenetrated market, and to drive long-term value creation. With that, let me turn the call over to Ana Maria Chadwick to discuss second quarter results and guidance in more detail.

Speaker 0

Thank you, Ashley, and good morning, everyone. We delivered another excellent quarter, growing new customer starts on a year-over-year and sequential basis in the U.S. for both Type 1 and Type 2 and in International. Consistent with prior quarters, over 85% of our U.S. new customer starts came from MDI, and over 30% were Type 2. In addition, we had the highest quarter of competitive switches since late 2023. Revenue for the total company was $649 million and grew 31% over prior years. On a reported basis, foreign currency had a favorable impact of 160 basis points. Our estimated global utilization and annualized global retention rate remained stable. Our team executed across the business, delivered exceptional top-line results while also expanding adjusted operating margin and increasing profit.

We are proud of these accomplishments and are raising full-year revenue guidance, making 2025 our 10th consecutive year of 20% or more growth on a constant currency basis. We are also raising our adjusted operating margin reflective of the operating leverage we are achieving across the business. I will walk through guidance in a few moments. Turning to our second quarter revenue results, U.S. revenue grew 28.7%, above the high end of our guidance range, on a strong performance from our commercial team as we continue to see great demand and momentum for Omnipod 5, which is driving growth in our customer base. U.S. Omnipod revenue growth benefited by approximately 350 basis points from a prior year stocking dynamic and an approximate 150 basis point tailwind related to the timing of rebates.

As we commented last quarter, this rebate dynamic was a headwind in the first quarter and expects to be neutral on a full-year basis. Turning to International, we had another quarter of exceptional execution, achieving revenue growth of 38.8%, above the high end of our guidance. On a reported basis, foreign currency was favorable, 620 basis points over the prior year. International growth was primarily driven by continued demand for Omnipod 5 and customer base growth. As expected, positive price mix realization also contributed to growth as customers shift from Omnipod DASH to Omnipod 5. We are seeing strong growth in the UK, Germany, and France, in addition to the other countries where we have launched Omnipod 5. We are also continuing to work with local health authorities to expand access and broaden our sensor integration roadmap to drive adoption. Moving down the P&L, gross margin was 69.7%.

Gross margin included approximately $10 million of inventory-related charges, including the write-off of legacy components as we support the strong demand and migration to Omnipod 5, our latest technology. We are pleased to have delivered 70.7% gross margin on a year-to-date basis, and we are on track to achieve our full-year guidance of approximately 71%. Operating expenses increased as we continue to invest in our pipeline of innovation and sales and marketing efforts, especially as we develop the Type 2 markets. Adjusted operating margin was 17.8%, and adjusted EBITDA margin was 24.3% in the second quarter. Our team is executing well across our growth objectives and reinvestment plans, which have together generated meaningful operating leverage. Our second quarter non-GAAP adjusted tax rate was 22.1%. Turning to cash and liquidity, we ended the quarter with $1.1 billion in cash and the full $500 million available under our credit facility.

We continue to strengthen our balance sheet, improve our financial flexibility, and lower our cost of capital. To date, we have extinguished $420 million of our convertible notes due in 2026, and we have initiated the redemption of the remaining $380 million, which will close later this month. During the quarter, we repurchased 93,000 shares for approximately $30 million under our $125 million authorization and also refinanced our term loan fee, reducing the rate by 50 basis points, which lowers our interest expense by approximately $12 million over the remaining term of the loan. Now turning to guidance, we are pleased to provide our outlook for the third quarter. As a reminder, our revenue growth guidance is on a constant currency basis. For the third quarter, we expect total Omnipod revenue growth of 24% to 27% and total company growth of 22% to 25%.

On a reported basis, we are assuming a favorable impact of 100 basis points from foreign currency. For U.S. Omnipod, we expect third-quarter growth of 21% to 24%. For International Omnipod, we expect third-quarter growth of 33% to 36%. On a reported basis, we are assuming a favorable impact of 300 basis points from foreign currency. Now turning to our full-year 2025 outlook. For the full year, we are raising our total Omnipod revenue growth guidance to a range of 25% to 28%. We are also raising our total company revenue growth guidance to a range of 24% to 27%. On a reported basis, we are assuming a favorable impact of 100 basis points from foreign currency for the year. For U.S. Omnipod, we're raising our revenue guidance range to 22% to 25%, driven by customer base growth.

We continue to win and lead in Type 1 and gain momentum in Type 2. We expect current demand trends supported by a consistent rate of patient conversions from MDI to support our strong growth. We expect year-over-year growth in U.S. new customer starts in 2025. As a reminder, our U.S. growth guidance for 2025 reflects similar trends in pricing, utilization, and retention as we saw in 2024. For International Omnipod, we are raising our revenue guidance to 34% to 37%. On a reported basis, we are assuming a favorable impact of 300 basis points from foreign currency. We expect to drive strong growth in the UK, Germany, and France, while also ramping adoption in our newer international markets, all supported by benefits from new sensor integrations and customer upgrades from Omnipod DASH to Omnipod 5. We expect year-over-year growth in international new customer starts in 2025.

While volume remains the primary driver of our international revenue growth, our guidance also reflects a modest uplift from positive price mix realization. We're also assuming stable utilization trends and, as previously communicated, retention trends improving slightly for 2025 relative to 2024. Turning to 2025 gross margin, for the full year, we are reaffirming our gross margin guidance of approximately 71%, which reflects 120 basis points of expansion over prior year and remains the highest in the diabetes technology space. Our full-year gross margin guidance now assumes an impact of approximately 20 basis points from tariffs, which is lower than our prior assumption of 50 basis points given the recent updates and changes in U.S. tariffs. Our strong manufacturing position and efficiencies from scale mitigate and absorb this impact.

For the year, based on our strong performance to date and continued operational leverage across the business, we are raising our adjusted operating margin guidance to a range of 17% to 17.5%. Our guidance includes plans to continue investing in R&D, market development, and demand generation. As we have communicated previously, we remain committed to driving at least 100 basis points of adjusted operating margin expansion annually. As demonstrated by our updated guidance, we will deliver well above this level in 2025. Looking at a few items below our operating income, consistent with what we have communicated last quarter, we expect our 2025 net interest expense to be approximately $30 million higher than 2024, largely due to the elimination of our convertible debt, which was at a higher cost of capital, and the replacement of our interest rate swaps, which expired this quarter.

For the year, we still expect our non-GAAP tax rate to be in the range of 20% to 25%. As communicated last quarter, we expect the 2025 ending balance of our diluted share count to be around 71 million, which is approximately 5% or 3.5 million shares lower than prior year due to the extinguishment of our convertible debt. From a cash perspective, on an annual basis compared to prior year, we expect free cash flow to be higher despite higher capital expenditures as we are now evaluating the acceleration of our manufacturing expansion plans due to the increase in global customer adoption. We remain excited and confident in our objectives to drive growth, expand margins, and increase profitability and free cash flow, all contributing to long-term value creation. Before moving to Q&A, I want to take a moment to share a leadership update.

Later this month, Claire Trappman will join Insulet as our new Vice President of Investor Relations, reporting to me. Claire joins us from Baxter, where she served as Vice President of Investor Relations for the past decade. She brings significant medtech investor relations experience, and her addition reflects the continued strengthening of our leadership team under Ashley's direction as we look to the future. We are incredibly grateful to June Lazaroff for her thoughtful interim leadership of the IR function and for her continued support to enable a seamless transition. June will remain with us through the end of August. With that, operator, please open the line for questions.

Speaker 1

Thank you. If you have a question at this time, please press star, then one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star one again. In the interest of time, we ask that you limit yourself to one question. You may rejoin the queue if you have additional questions. As a reminder, the speakers available for Q&A today are Ashley McEvoy, Ana Maria Chadwick, and Eric Benjamin. Our first question comes from the line of Robbie Marcus from JP Morgan. Your line is open.

Hi, this is Lily on for Robbie. Thanks so much for taking the question. Both the U.S. and International came in nicely ahead. Can you talk about some of the drivers of the upside both in the U.S. and internationally, and the trends that you're seeing in those different geographies across new patient growth?

Speaker 4

Thank you, Lily. Listen, we're pleased to see that really our strategy is working. We continue to lead in Type 1. As you mentioned, we're driving very strong adoption as the first mover in Type 2. Our international growth is accelerating, and we are continuing to invest in platform innovation and clinical outcomes. In the U.S., you can see we command the largest customer base there. Our new customer starts are off to acceleration both year over year and sequentially. I think in the U.S., we're really seeing very strong adoption of the Omnipod 5 Automated Insulin Delivery System based upon very, very strong clinical outcomes that we've been sharing at the ADA. We continue to integrate those with the latest sensors, as mentioned with the G7 and iOS compatibility.

I would say Type 2 in the U.S., very strong momentum based upon really bringing the science and the evidence to the clinicians. As you know, we have a very strong history here and equity built over 25 years with the endo community in Type 1, and we're leveraging that as we start to penetrate the Type 2 community. OUS, as we mentioned in our remarks, we have a very strong concentration in three key markets: UK, France, and Germany, which comprise the majority of our business OUS, and all of those are really benefiting from the launches of Omnipod 5. As we've mentioned on prior calls, we've also expanded Omnipod 5 now to inclusive of a total of 14 markets, and all of those are driving strong adoption. Thank you for the question, Lily.

Speaker 1

Your next question comes from a line of Travis Steed from Bank of America. Your line is open.

Hey, congrats on the quarter and congrats on hiring Claire. She's a well-loved IR person, so it's a good get. I wanted to ask on Type 2 and the new starts. You said they accelerated this quarter. What do you think kind of drove that acceleration? Can the acceleration continue in the back half of the year and just get an update on the overall Type 2 opportunity here?

Speaker 4

Thank you, Travis. Type 2, as we know, is a massive opportunity with a large TAM, and it's great to have a first mover advantage. As I mentioned, we're really parlaying and coming from a position of strength of 25 years, really getting AID therapy, endos, and high prescribing PCPs comfortable with that. You know, when we look at Type 2, the framework that we're abiding by is, number one, really sharing our strong clinical evidence. We share this again with the ADA and Secure T2D. We do, in fact, lower A1Cs, and we improve time in range. Second is really we have very strong market access and ease of use.

I like to say not all pharmacy access is created equal, but we have access to 47,000 pharmacists, Travis, where we have also coverage over 300 million lives are covered with Omnipod in a preferred position with very low copays. In fact, on average, it's around $1 a day for our patients, and that really has enabled very strong access as well as affordability. We've been working on our field. You mentioned that we've been expanding our field force, getting them really comfortable to not just sell in our unique form factor, but also to sell in the science. Also, we are sourcing not just patients from MDI, but as Ana Maria Chadwick mentioned in her results, we actually did experience our quarter, the highest in eight quarters, where we sourced some of that volume from competitive users.

I just think that we just got to continue to get the word out that we have a highly differentiated technology with really strong outcomes.

Speaker 1

Your next question comes from a line of Jeff Johnson from Baird. Your line is open.

Thank you, guys. Good morning. Congrats on the strong quarter. Ashley, as we're all trying to get to know you a little bit better here, I think one of my questions, just such a strong raise in 2Q here, and 2Q can be a tricky quarter because I think a lot of companies would like to leave a little bit of room for 3Q and 4Q as well. Just your overall framework and how you think about guidance. Do you like to set guidance at realistic numbers? Are they numbers that you feel maybe a little aggressive, a little conservative? Just kind of your framework for how you think about guidance, especially after today's strong raise. Thanks.

Speaker 4

Thank you, Jeff. I think what Ana's commentary of future guidance, it really reflects the remarkable business that we've had year to date in 2025. My philosophy on guidance really doesn't change from what Insulet has been sharing with the community. I'll turn it to Ana to add some remarks.

Speaker 0

Yes, you know, we set guidance with the full intent to hit it. Nothing has changed in our fundamentals. We're excited to have raised guidance here by 5%, and it's actually three times the beat we had here in the second quarter. This reflects that we're seeing the momentum and we're leaning in, and we'll keep you all updated.

Speaker 1

Your next question comes from a line of Larry Biegelsen from Wells Fargo. Your line is open.

Hi, good morning. This is Simran on for Larry. Thanks for taking the questions here and congrats on a really strong quarter. Maybe just to focus on the U.S. business, if I take all the pieces of the guidance, it implies about 14% to 22% growth in Q4, if I'm doing my math right, which is a pretty wide range. Can you talk about what gets you to the high end versus the low end of the range, and how should we think about that in the context of 2026? Is 20% growth still a good way to think about the U.S. business going forward?

Speaker 0

Thank you for joining, Simran. I'll turn it to Ana Maria Chadwick to make some remarks. Great. You know, our underlying business trends are very stable. Let me unpack some key dynamics. Specific in the U.S., we have talked about stocking and rebate dynamics. When you take those into account, our first half normalized growth rate is 24%. In the context of that, our back half guidance is very strong. We do not anticipate anything changing here, just the momentum continuing, and we expect to have a positive update for all of you as we get into our third quarter earnings call.

Speaker 1

Your next question comes from a line of Joanne Wench from Citibank. Your line is open.

Good morning. Nice quarter, and thank you for taking the question. Internationally, it sounds like it's going quite well for you with the target on four countries. How do you think about expanding those or expanding the footprint as you push further outside the U.S.? Thank you so much.

Speaker 4

Thank you, Joanne, for the question. Yeah, I mean, our international business had a very strong quarter, and really, our kind of three key drivers of profitable growth outside of the U.S. are, one, continued penetration of our existing markets like the UK, France, and Germany, where I would say we have strongholds, and there's lots of opportunities to really increase penetration in those stronghold markets. In those markets, with the launch of Omnipod 5 and the conversion from Omnipod DASH System to Omnipod 5, we are commanding a positive price mix realization. I would say we're being very thoughtful around what are the other markets to expand to so that we can ensure that we're meeting people with diabetes, but in a very financially disciplined fashion. Some of the markets that we launched Omnipod 5, like Canada, Australia, the Netherlands, they're all going very well.

We've queued up some additional markets that we plan to share with you on November 20th at Investor Day, but we really are having a balanced strategy, I would say, on going deep and valuing depth, you know, as we assess what markets that we go broad on.

Speaker 1

Your next question comes from a line of Shegan Singh from RBC. Your line is open.

Great. Thank you so much. I was hoping you could shed some light on second half guidance. I think it assumes about 21% selling day adjusted growth versus 30% in the first half. Can you maybe just elaborate on some of the assumptions behind the 2025 guidance? What drives the step down in Q2? Is it conservatism, or are there other factors to consider? You did call out for U.S. Omnipod revenue in Q2. You called out some stocking dynamic and some tailwind around rebate. If you can just help us with some of the puts and takes to come up with the underlying growth, that would be helpful. Thank you.

Speaker 0

Sure, Shegan, this is Ana. As I mentioned, on our underlying basis, our business is very, very stable here. Unpacking some of the dynamics, you just called stocking as one, absolutely, and then also the rebate dynamics. When you put all of those together, our first half U.S. normalized growth rate is at 24%. In that context, the guidance here is very strong, and we're lifting by quite a bit, as I mentioned just now. We are raising our guidance by three times the beat that we had here in the second quarter. We're leaning in because we're seeing this momentum sticking and being strong for us. We look forward to giving you a positive update as we go into our third quarter earnings. Everything's trending and growth is strong.

Speaker 1

Your next question comes from a line of David Roman from Goldman Sachs. Your line is open.

Thank you. Good morning. I just wanted to echo Travis's comments on Claire joining the company and the opportunity to work with her directly. I think she'll be a great addition to the team. I also want to thank June for all of her support as we've gotten up to speed here on the company. Maybe I'll just ask on a comment that you made towards the latter part of the call around increasing CapEx to support higher demand. Can you go into a little bit more detail there on how demand has shaped up relative to expectations and if that acceleration in CapEx is a reflection of a view of demand tracking ahead of original expectations and a view that that can continue here, and how we should put those pieces together?

Speaker 4

Thank you for the question, David. I would first start with, again, we have a history here of investing ahead of the curve, of making sure that we have the appropriate amount of capacity to say yes to all of the demand. I am very pleased with how the team has been executing really the past year of adding new lines into Acton, which are fully up and producing high-quality pods, as well as extending our presence in Malaysia and getting that plant. We are coming up on our year anniversary to really meet the global demands. We have been a pioneer in advanced automation and manufacturing capabilities, and we will continue to do that. What Ana was referencing is you are going to see us continue to invest in our supply chain build-out to make sure that we stay ahead of the curve of meeting global demand.

Speaker 1

Your next question comes from a line of Michael Pollard from Wolfe Research. Your line is open.

Good morning. I'm interested in a comment on the recent Medicare proposal around competitive bidding and shifting payment in the DME channel to pay over time. I understand you're not directly exposed here. You have chosen a different business model, so nothing to say on that. If this moves forward, the industry stands to change quite a bit. I'm interested in what Insulet is thinking about as to how to stay ahead of those potential shifts as you digest what's a very complex suggestion rule from the government. Thank you.

Speaker 4

Thank you for the question, Mike. We've been reviewing the CMS proposal. We clearly support the increased access to the latest technology for diabetes management. As you know, we are available to patients on an as-you-go basis, a pay-as-you-go, and it's sold with near 100% of our distribution through the pharmacy channel, as I mentioned, 47,000 pharmacies. We clearly think that insulin delivery systems that are a part of Medicare Part D are not eligible for competitive bidding under Part B. We are going to continue to engage in CMS to really talk about the benefits of our differentiated Omnipod 5 technology and how we improve care for people with diabetes.

Speaker 1

Your next question comes from a line of Richard Newitter from Truist Securities. Your line is open.

Hi, thanks so much for taking the questions and congrats on the quarter. I'm wondering if you could just comment a little bit on how the T2 indication is potentially allowing you to better compete for Type 2 patients versus the competition, and how much of the momentum you're seeing there from last quarter or the last few quarters is that indication versus converting to marketing initiatives direct to patients.

Speaker 4

Thank you, Richard, and thanks for your interest in POD. Appreciate you guys joining. I'm going to turn it to Eric.

Richard, this is Eric. Maybe just some color on Type 2, the indication and competition. First, the indication is really helping us build the market as first movers in Type 2. We have the Secure T2D study, which shows 0.8 A1C reduction on average and significant A1C reduction up to 2% for those with A1C over 9. That kind of clinical impact really resonates with prescribers who are looking for solutions for those who live with Type 2 diabetes. What our team is doing is they're bringing the power of that evidence to folks with whom we have strong relationships, and we're activating more prescribers, getting them comfortable prescribing AID. As it relates to competition, Omnipod is just so differentiated and so simple to use that it gives us some strengths in addition to that body of evidence that help us compete in the market.

In addition to the strengths of technology, we're also unique from an access perspective. We are available in a pay-as-you-go capacity at copays typically about $1 a day, right where they get their insulin. We continue to work on how we simplify that customer journey to help those who wouldn't otherwise have access to technology get the benefits of Omnipod.

Speaker 1

Your next question comes from a line of Izzy Kirby from Redburn Atlantic. Your line is open.

Hey, guys. Thanks so much for taking my question. On Type 2, I'm sorry if I missed this, but did you break out the proportion of new starts in the U.S. coming from Type 2? I think that's usually something we've had from you guys. Just following on on Type 2, how should we think about who is prescribing Type 2 scripts early doors? Is it leaning more primary care, still very much in the endo space? What are you seeing in terms of direct-to-consumer leads as well? Thank you.

Speaker 4

Thank you, Izzy, for the question. Let me first start with the strength in our U.S. Type 1 in the United States. We had very strong improvement in our total customer base, in our total prescriber base, as well as our new customer starts. That has enabled us to maintain the position of being the number one most prescribed, the number one most requested AID, and number one in new customer starts in the United States for Type 1. That really is our core business. We are parlaying a lot of that leverage to high prescribing endos first and really ensuring that they're following the science as endorsed by the ADA on standards of care using AID therapy as first line of therapy.

I like to say, taking the science to the street of making sure we get that cohort really comfortable as they are equally comfortable with the Type 1 community. We are working with them to help influence and get the confidence in high prescribing PCPs in the marketplace. We are actively invested in our science and scaling up our sales force to get comfortable with the science to really follow the guidelines. As we shared, the new customer starts coming from Type 2 in the United States are approximately about a third of our new customer starts in the United States.

Speaker 1

Your next question comes from a line of Matt Taylor from Jefferies. Your line is open.

Good morning. Thank you for taking the question. I had a related question on your last comment there. You talked about earlier on this call about 25,000 subscribers, I think, and it sounds like the sales force expansion has been relatively seamless. I was just thinking Dexcom, I think, calls out 100,000 subscribers in the U.S. Do you think that we'll continue to see that kind of growth towards the Dexcom number over time, or are you viewing your growth in the future coming more from, quote unquote, "same store" growth?

Speaker 4

Thank you for the question, Beth, and I welcome you to come when you hear our whole story at Investor Day in Acton on November 20th. We're seeing really strong growth on our core where we also have very low penetration still and a lot of room to go in the United States. I would say that we have a new indication. It's really a greenfield in the Type 2 community. The continuous glucose monitor sensors are out there first, driving broad adoption in the insulin-using and non-insulin-using patients, but we have a lot of opportunity to drive continual growth. It's not going to be a linear line per se, I would say, on Type 2 because this is a new market that we're creating and we're learning and we're honing our approach.

We're very pleased with we're coming up on nearly one year of really talking this with the clinicians and patient community. Stay tuned for more as we talk about it on November 20th.

Speaker 1

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

Great. Thanks for taking my question. Ashley, I think when you first started, there was some fear about operating margin expansion and maybe some of the reinvestments you had talked about. It's interesting, you had significant leverage, especially on the SG&A component of that this quarter. I was wondering, has anything changed there? Did you free spending? Did you just change what the strategy and the investment was, and you've not yet just implemented it? How should we think about that kind of going forward? Thanks.

Speaker 4

Yeah, thanks for the question, Bill. I would say our strategies are in fact intact. Our Type 1, you know, we're leading in Type 1. We're creating the market in Type 2. We're growing profitably in international markets, and we're advancing our innovation agenda and supply chain. If you were to ask me areas that I think that we can move faster and to deepen our advantage and where we plan to invest additional capital, I would call out four areas. The first is accelerating the pace of innovation across algorithms, sensor innovation, our next generation architects for like hybrid closed-loop and our fully closed-loop, as Eric was mentioning, of what's in clinical trial right now.

Second is about being the market maker, continuing to be the market maker, and driving market development by bringing the evidence, the scientific evidence, to the healthcare professionals and patients and continuing to improve what we think is really superior access and affordability in our markets. The third that we're looking to invest more is our commercial excellence and our commercial engine and demand generation. I talk about selling our science in addition to our unique form factor and leveraging our brand, as Eric was mentioning, to create a more seamless customer experience from lead generation to retention. Finally, continuing to build global scale and resiliency in our supply chain to really serve the next leg of demand and increase our cost advantages.

Speaker 1

Your next question comes from a line of Matthew O'Brien from Piper Sandler. Your line is open.

Good morning. Thanks for taking the question. I wanted to ask about that comment on an acceleration I think Ana Maria Chadwick mentioned in competitive conversions in the quarter. Can you just talk a little bit about what drove that? Is that the commentary about MDI acceleration or record new patient numbers in Q2? Is that excluding the new competitive conversion? On its own, MDI would have accelerated, and then the competitive conversions are on top of that? Thank you.

Speaker 4

Go ahead, Eric.

Yeah. Good morning. Let me deal with the numbers first. Yes, MDI accelerated and competitive conversions accelerated, and both Type 1 and Type 2 grew year over year and sequentially. In terms of what's driving that, we think of a couple of things. First, we've delivered impactful innovation. Omnipod 5 is safe, effective, understood to be really easy to use, and we've done a great job making it accessible. That pay-as-you-go access with no commitment at low copay makes it easy for folks to get started with that great technology. Additionally, our team is doing a great job executing in the field and serving customers. It's really those three things: innovation, access, execution, and market.

Speaker 1

Your next question comes from a line of Danielle Antalfi from UBS. Your line is open.

Hey, good morning, everyone. Thanks so much for taking the question, and congrats on a really strong quarter here. I just wanted to follow up on the primary care physician side of things, and I'm just curious if you guys could talk about, maybe Eric, this is for you, sort of how the go-to-market strategy with primary care differs from endocrinologists. You know, endos have been adopting pumps for a very long time. Primary care, you know, they're dealing with a lot of other things besides their, in addition to their diabetic patients. Just curious about how heavy the lift is in primary care versus endo and sort of how you guys are adapting to that. Thanks so much.

Speaker 4

Thank you, Danielle, for the question. I would say a couple of things. One, you asked about endos and high prescribing PCPs in the U.S. marketplace. I would say our highly differentiated technology, which is really simple to use, has had a remarkable early impact on people with Type 2, who perhaps may be fearful of what they view to be complex technology. Because of that, we're starting to get really good adoption rates. What we're finding from the high prescribing, where the PCP audience who are insulin-intensive, that simplicity of technology coupled with the strong science, which shows the clinical outcomes of reducing A1Cs and improving time in range, and also slowing down the weight gain and slowing down lows for hypoglycemia. You can use the GLP-1. We shared all this messaging at the ADA.

That, coupled with the really differentiated access and affordability, I think is what's driving even high prescribing insulin-intensive PCPs to get comfortable. We're very much at early innings, and we plan to share a lot more on Investor Day. In the past 12 months, those are some of the behaviors and the reasons why it's starting to get early traction. On that, Eric, I'll see if you have anything to add.

Maybe just briefly, Danielle, I think what we see is that those who've been prescribing AID, it's a question a lot about changing how they think about AID as it's relevant to the folks who live with Type 2 diabetes that they're seeing in their office every day. It's a lot about selling the science and helping them see that as a great solution for that population that they're already caring for. When we go into an office that may not already be prescribing AID, it is just a little bit of a conversation. It's about, you know, how do we provide support to them, which may be new for them, and helping them get folks trained and care for folks once they're on product. We educate on that experience and how we make that easy for them.

Speaker 1

Your next question comes from the line of Jason Bedford from Raymond James. Your line is open.

Good morning, and congrats on the progress here. Just on the international business, big step up sequentially, growth accelerated off an already high level. It didn't sound like it, but was there a notable contribution from any new geographies? Just one other quick one, thinking of the volume price mix, where are you in terms of Omnipod 5 adoption within your international base? Thanks.

Speaker 4

Thank you for the question, Jason. I'll have Ana Maria Chadwick put on, so you can answer now.

Speaker 0

Absolutely. Yeah, you know, 39% great growth. What we're seeing is Omnipod 5 conversions are now up to about 50% of our total. That's a rapid growth from last quarter, which was about 40%. That price mix realization is kicking in, and the way to think about it is in that 39%. This quarter, we had a bit of an outsized amount of that price mix realization in the low double digits. We're very pleased with the durable growth that we have across the markets, as we mentioned in our more established markets that we've been a couple of years, and the new ones just ramping up. Durability of the growth in international is here with us.

Speaker 1

Your next question comes from the line of Matt Mickzik from Barclays. Your line is open.

Oh, thanks so much for taking the question. Maybe just a follow-up on the last question on really impressive overseas growth. If you could talk maybe a little bit about the mix effect of having such a strong outside the U.S. geographical contribution, you know, down the P&L, if there are any notable differences in the way that kind of drives the P&L, and then also the way that you scale into some of these geographies in addition to kind of the mix to Omnipod 5. Is there a little bit of a follow-up to the last question. Was there kind of a step up in, I don't know, new distributorships or significant steps that we can build off of, but that maybe kind of feed back into your views on the back half and how you're thinking about guidance?

Speaker 0

Yeah, great question. I'll start, and maybe others here will add, but as we've talked about before, we have these layers of built-in growth. We started UK and Germany over two years ago. We went with France and Netherlands, and now we've expanded that to nine more markets. Having said that, the key thing to point out is the launch of Omnipod gives us a lift. The second thing that happens is we add capabilities, right? We add sensors, and that gives us a further lift. We're working with the different health authorities to continue to expand the access. This is part of that durability. The other thing to mention in the price mix realization is we're only 50% of our customer base has converted from DASH to Omnipod 5, and this is in addition to all the MDI conversions that we're getting.

I hope that gives you a flavor of our durable growth in international.

Speaker 4

Yeah, the only thing I would add to that, Matt, is to say it's really consistent with the strategy to build the market and to really be the market maker and the team working in the UK to establish NICE guidelines, you know, to really get AID therapy as a standard of care or working with the French government where we got full reimbursement. Those market access and development levers allow a differentiated technology like Omnipod 5 to really come in and drive sound penetration, earning and commanding a price premium as we elevate the transition, not only just from our DASH users, but from really converting MDI users over to the latest technology of Omnipod 5. We have launched, as Ana Maria Chadwick mentioned, you know, we've launched in Italy this year and Nordics, in Australia, Belgium, Switzerland, Canada. They haven't had material impact to date.

The majority of our growth OUS is coming from our three core markets. We anticipate them to start to contribute in the next upcoming quarters.

Speaker 1

Your next question comes from a line of Chris Pascual from Nephron Research. Your line is open.

Hi, good morning. This is Cari on for Chris. Thanks for taking the question. I just wanted to follow up on the gross margins. It looked like you would have exceeded 71% the first half if you exclude the inventory charge, and your outlook on tariffs has improved by about 30 bps. It looks like you reiterated your margin guidance for the year. How are you thinking about the second half and if you see potential for any underlying improvement there? Thank you.

Speaker 0

Great question. All the things you mentioned are spot on. I just want to point, maybe in addition, we're seeing on a year-over-year basis some of that FX pressure as well as quarter-over-quarter in the tune of 30 basis points. We feel the underlying performance of the business in operations is very strong. Year to date, we're sitting at 70.7% and for a full year guide of 71%. This represents 120 basis points. This guide represents 120 basis points expansion on a year-over-year basis. Stay tuned. We'll continue to update, but we feel we're in a very good position to deliver the 71%.

Speaker 1

This concludes our question and answer session. I will now turn the conference back to Ashley McEvoy.

Speaker 4

Thank you. I appreciate everyone in joining. I'm clearly excited about the opportunity that we have to scale this remarkable business and create value for shareholders, but also importantly, improve the lives for millions of folks with diabetes. I wanted to thank June for your stewardship and wish you all the best. I wanted to welcome Claire and really give a shout out to thank Team Insulet for unwavering dedication to people with diabetes and a remarkable quarter. Thank you.

Speaker 1

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