Market Overview

Insulet Reports Second Quarter 2018 Revenue of $124.3 Million, Up 13% Year-Over-Year, and Gross Margin of 66%, Up 710 Basis Points

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Full Year 2018 Expected Revenue Growth Revised to 18% to 21%

Third Quarter Expected Revenue Growth of 19% to 24%

Insulet Corporation (NASDAQ:PODD) (Insulet or the Company), the global
leader in tubeless
insulin pump
technology with its Omnipod® Insulin
Management System (Omnipod System), today announced financial results
for the three months ended June 30, 2018.

Second Quarter Financial Highlights:

  • Second quarter revenue of $124.3 million, up 13%, net of a $7.4
    million inventory repurchase from the Company's former European
    distributor, compared to guidance of $130 to $134 million
    • U.S. Omnipod revenue of $78.1 million, an increase of 19%
    • International Omnipod revenue of $28.5 million, an increase of 7%,
      net of the $7.4 million repurchase
    • Drug Delivery revenue of $17.7 million, a decrease of 1%
  • Gross margin of 66%, up 710 basis points

Recent Highlights:

  • Assumed direct European operations on July 1st for Omnipod
  • Commenced U.S. limited market release of Omnipod DASHTM,
    Insulet's next-generation mobile platform, following FDA clearance in
    June
  • Secured in-network coverage with UnitedHealthcare for Omnipod,
    effective April 2018
  • Secured Medicare formulary coverage with two Part D plan sponsors,
    effective April 2018
  • Presented nine abstracts at the American Diabetes Association's 78th
    Scientific Sessions; Omnipod HORIZONTM clinical abstract
    selected for ADA's Official Press Program for the data's overall
    excellence
  • Selected as preferred insulin pump in British Columbia, Canada

"We are making tremendous progress on our strategic initiatives,
including launching direct operations in Europe, executing on our
innovation roadmap, expanding market access, and building our U.S.
manufacturing facility," said Patrick Sullivan, Chairman and Chief
Executive Officer. "Our commitment to operational excellence is driving
our strong revenue growth and continuing gross margin expansion. We are
on track to achieve positive operating income in 2018 and our 2021
revenue and gross margin targets."

Mr. Sullivan continued, "Our updated outlook for the year reflects the
short-term impact of transitioning to direct operations in Europe as we
exited our distributor relationship. We are truly excited to gain
control of our European business and realize the significant benefits
this transition provides. The creation of Insulet Europe is just the
beginning of our vision to grow Omnipod adoption around the world."

Second Quarter 2018 Financial Results:

Second quarter 2018 revenue increased 13% to $124.3 million, compared to
revenue of $109.8 million in the second quarter of 2017.

Operating income for the second quarter of 2018 was $4.3 million,
compared to an operating loss of $3.4 million in the second quarter of
2017.

Net loss for the second quarter of 2018 was $1.7 million, or $0.03 per
share, compared to a net loss of $7.8 million, or $0.13 per share, in
the second quarter of 2017.

Guidance:

  • For the year ending December 31, 2018, the Company is revising its
    revenue guidance to a range of $547 to $562 million, representing
    growth of approximately 18% to 21% (previously $565 to $580 million),
    compared to 2017 revenue of $463.8 million. The Company is revising
    its expectations for its International Omnipod product line due to the
    short-term impact of transitioning to direct operations in Europe. The
    Company is raising its revenue expectations for U.S. Omnipod and Drug
    Delivery.
  • For the quarter ending September 30, 2018, the Company is introducing
    revenue guidance in the range of $144.5 to $151.5 million, compared to
    third quarter 2017 revenue of $121.8 million, representing growth of
    approximately 19% to 24%.

Future results may be affected by changes in ongoing assumptions and
judgments, and may also be affected by non-recurring, unusual or
unanticipated charges, expenses or gains.

Conference Call:

Insulet will host a conference call at 4:30 p.m. (Eastern Time) on
August 2, 2018 to discuss the financial results and outlook. The link to
the live call will be available on the Investor Relations section of the
Company's website at http://investors.insulet.com,
"Events and Presentations", and will be archived for future reference.
The call may also be accessed by dialing (844) 831-3022 for domestic
callers or (315) 625-6887 for international callers, passcode 3342069.

About Insulet Corporation:

Insulet Corporation (NASDAQ:PODD), headquartered in Massachusetts, is
an innovative medical device company dedicated to making the lives of
people with diabetes and other conditions easier through the use of its
Omnipod product platform. The Omnipod Insulin Management System provides
a unique alternative to traditional insulin delivery methods. With its
simple, wearable design, the disposable Pod provides up to three days of
non-stop insulin delivery, without the need to see or handle a needle.
Insulet also leverages the unique design of its Pod, by tailoring its
Omnipod technology platform for the delivery of non-insulin subcutaneous
drugs across multiple therapeutic areas. Founded in 2000, more than
140,000 users across the globe rely on Insulet's Omnipod Insulin
Management System to bring simplicity and freedom to their lives.

On July 1, Insulet assumed direct operations of its Omnipod Insulin
Management System product line in Europe, including sales, marketing,
training and customer support activities. This allows Insulet to be
closer to the diabetes community and identify opportunities to support
European customer needs over the long-term, as Insulet does in the
United States and Canada.

For more information, please visit: www.insulet.com
and www.myomnipod.com.

Forward-Looking Statement:

The 2018 financial results contained in this news release are subject to
finalization in connection with the preparation of the Company's Form
10-Q for the quarter ended June 30, 2018. This press release contains
forward-looking statements concerning Insulet's expectations,
anticipations, intentions, beliefs or strategies regarding the future.
These forward-looking statements are based on its current expectations
and beliefs concerning future developments and their potential effects
on Insulet. There can be no assurance that future developments affecting
Insulet will be those that it has anticipated.

These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond Insulet's control) or other
assumptions that may cause actual results or performance to be
materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include, but
are not limited to: risks associated with the Company's dependence on
its principal product platform, the Omnipod System; risks associated
with the Company's ability to design, develop, manufacture and
commercialize future products; Insulet's ability to reduce production
costs and increase customer orders and manufacturing volumes; adverse
changes in general economic conditions; impact of healthcare reform
laws; Insulet's ability to raise additional funds in the future on
acceptable terms or at all; potential supply problems or price
fluctuations with sole source or third-party suppliers on which Insulet
is dependent; the potential establishment of a competitive bid program
for conventional insulin pumps; failure by Insulet to retain supplier
pricing discounts and achieve satisfactory gross margins; failure by
Insulet to retain key supplier and payor partners; international
business risks; Insulet's inability to effectively operate the Company's
business in Europe following the expiration of its distribution
agreement with its European distributor on June 30, 2018; Insulet's
inability to secure and retain adequate coverage or reimbursement from
third-party payors for the Omnipod System or future products and
potential adverse changes in reimbursement rates or policies relating to
the Omnipod System or future products; failure to retain key payor
partners and their members; potential adverse effects resulting from
competition; technological change and product innovation adversely
affecting the Company's business; potential changes to or termination of
Insulet's license to incorporate a blood glucose meter into the Omnipod
System or its inability to enter into new license or other agreements
with respect to the Omnipod System's current or future features;
challenges to the future development of our non-insulin drug delivery
business; Insulet's ability to protect its intellectual property and
other proprietary rights; conflicts with the intellectual property of
third parties, including claims that Insulet's current or future
products infringe or misappropriate the proprietary rights of others;
adverse regulatory or legal actions relating to the Omnipod System or
future products; failure of Insulet's contract manufacturers or
component suppliers to comply with FDA's quality system regulations; the
potential violation of international, federal or state laws prohibiting
"kickbacks" or protecting the confidentiality of patient health
information or other protected personal information, or any challenge to
or investigation into Insulet's practices under these laws; product
liability lawsuits that may be brought against Insulet; reduced
retention rates of our customer base; unfavorable results of clinical
studies relating to the Omnipod System or future products, or the
products of Insulet's competitors; potential future publication of
articles or announcement of positions by diabetes associations or other
organizations that are unfavorable to the Omnipod System; the
concentration of substantially all of Insulet's manufacturing operations
at a single location in China and substantially all of Insulet's
inventory at a single location in Massachusetts; Insulet's ability to
attract and retain personnel; Insulet's ability to manage its growth;
fluctuations in quarterly results of operations; risks associated with
potential future acquisitions or investments in new businesses;
Insulet's ability to generate sufficient cash to service all of its
indebtedness; the expansion of Insulet's distribution network; Insulet's
ability to successfully maintain effective internal control over
financial reporting; the volatility of the trading price of Insulet's
common stock; risks related to future sales of its common stock or the
conversion of any of the Convertible Senior Notes; potential limitations
on Insulet's ability to use its net operating loss carryforwards;
anti-takeover provisions in its organizational documents; and other
risks and uncertainties described in its Annual Report on Form 10-K,
which was filed with the Securities and Exchange Commission on
February 22, 2018 in the section entitled "Risk Factors," and in its
other filings from time to time with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties
materialize, or should any of its assumptions prove incorrect, actual
results may vary in material respects from those projected in these
forward-looking statements. Insulet undertakes no obligation to publicly
update or revise any forward-looking statements.

   

INSULET CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS

 
 
Three Months Ended June 30, Six Months Ended June 30,

(Unaudited)
(In thousands, except per share data)

2018   2017 2018   2017
Revenue $ 124,262 $ 109,756 $ 247,840 $ 211,469
Cost of revenue 42,190   45,117   89,953   87,432  
Gross profit 82,072 64,639 157,887 124,037
Operating expenses:
Research and development 18,418 18,029 38,330 35,529
Sales and marketing 35,605 29,475 67,738 57,570
General and administrative 23,724   20,493   47,494   39,604  
Total operating expenses 77,747   67,997   153,562   132,703  
Operating income (loss) 4,325 (3,358 ) 4,325 (8,666 )
Interest expense and other, net 5,604   4,308   11,840   8,881  
Loss before income taxes (1,279 ) (7,666 ) (7,515 ) (17,547 )
Income tax expense 412   101   745   197  
Net loss $ (1,691 ) $ (7,767 ) $ (8,260 ) $ (17,744 )
Net loss per share basic and diluted:
Net loss per share $ (0.03 ) $ (0.13 ) $ (0.14 ) $ (0.31 )
 
Weighted-average number of shares outstanding 58,833 57,977 58,659 57,836
 

INSULET CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS

   
 

(Unaudited)
(In thousands)

June 30, 2018

December 31,
2017

ASSETS
Cash, cash equivalents and short-term investments $ 299,792 $ 440,056
Accounts receivable and unbilled receivable 63,634 53,373
Inventories 40,808 33,793
Prepaid expenses and other current assets 17,559   9,949
Total current assets 421,793 537,171
Long-term investments 156,060 125,549
Property and equipment, net 197,564 107,864
Goodwill and intangible assets, net 45,478 44,191
Other assets 17,961   1,969
Total assets $ 838,856   $ 816,744
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 25,191 $ 24,413
Accrued expenses and other current liabilities 50,918   61,612
Total current liabilities 76,109 86,025
Convertible debt, net 577,119 566,173
Other long-term liabilities 6,480   6,030
Total liabilities 659,708 658,228
Stockholders' Equity 179,148   158,516
Total liabilities and stockholders' equity $ 838,856   $ 816,744

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