Insulet Corporation (PODD) Earnings

Management highlights

### Overall Core Performance - Delivered strong Q2 2026 results with 23% constant currency total revenue growth (above internal expectations), expanding adjusted operating margin (+140 bps YoY), and 42% adjusted EPS growth. - Global new customer starts for Omnipod rebounded from Q1 seasonal slowdown, hitting the second highest quarter ever, driving 23% YoY growth in the global customer base. - US prescriber base grew 27% YoY to over 32,000 healthcare providers, with over 85% of new US customers coming from MDI users and 40% of new starts being people with type 2 diabetes. Omnipod 5 became the top-selling insulin pump for new users in Australia, and the product recently launched in Spain, expanding the company's global footprint. ### Type 2 Diabetes Market Learnings and Strategic Actions - After 20 months of serving the type 2 market, management identified lower-than-expected utilization and retention, concentrated in the first 90 days of therapy, a critical onboarding window. Retention stabilizes after 90 days, matching trends seen in type 1 customers. - To address these gaps, four key changes are being implemented: - Expand the customer care team to support onboarding and insurance navigation for new type 2 customers - Revise Salesforce compensation to reward long-term retention, rather than only new customer starts - Refine sampling programs to target patients most likely to benefit and provide support throughout the trial period to improve conversion and retention - Roll out the Omnipod Discover cloud platform, which already has 12,000 patients and 1,600 providers using it, with early data showing improved satisfaction and retention - Management is also building a unified customer data and engagement platform to enable personalized support and improve long-term lifetime value. ### Long-Term Strategic Pillars - **Market Leadership**: Insulet is the leader in the fast-growing automated insulin delivery (AID) segment, which remains heavily underpenetrated across both type 1 and type 2 diabetes. Management expects new competitors to expand overall category awareness and adoption, extending the company's leadership. - **Robust Innovation Pipeline**: The company plans annual algorithm enhancements through 2030; positive pivotal data for Omnipod 6 has been presented, and the fully closed-loop system designed specifically for type 2 diabetes (no bolusing, no manual settings) is progressing through its pivotal EVOLVE study, with a 510(k) submission expected in 2027. This pipeline directly addresses the unique needs of type 2 patients. - **Commercial Expansion**: The company continues to invest in brand building, DTC marketing, provider education, Salesforce expansion, and payer access. In Q2, Insulet added coverage for 6.5 million additional lives and simplified prior authorization for 10 million lives. - **Unmatched Manufacturing Network**: Insulet's scale and operational expertise create a high barrier to entry for competitors. - **Strong Recurring Revenue Model**: The business generates consistent strong cash flow, providing financial flexibility for continued investment in innovation, commercial capabilities, and manufacturing while maintaining disciplined capital allocation.

Guidance

- **Full Year 2026**: Management revised total company constant currency revenue growth guidance down to 20-22% from prior expectations, driven by lower-than-anticipated retention and utilization in the type 2 customer base. US Omnipod growth guidance was revised down to 17-19%, while international Omnipod growth guidance was raised to 30-32% (constant currency) reflecting stronger than expected first half performance. Total Omnipod constant currency growth guidance is 21-23%. Foreign exchange is expected to add ~100 bps to total and Omnipod growth, and ~300 bps to international growth. - Management maintained the full-year 2026 target of ~100 bps adjusted operating margin expansion, and expects adjusted EPS growth of at least 30% year-over-year. Free cash flow is expected to be modestly lower than 2025 levels due to manufacturing expansion capital expenditures, but remains healthy. - **Q3 2026**: Total company revenue growth is expected to be 17.5-19.5% (reported), with Omnipod growth of 18-20% (reported). US Omnipod growth is expected to be 14-16% (reported), and international Omnipod growth is expected to be 28-30% (reported). Foreign exchange is expected to act as a 50 bps headwind to total and Omnipod growth, and a 200 bps headwind to international growth. - **2027 Preliminary View**: Formal 2027 guidance will be provided on the Q4 2026 earnings call. Based on the midpoint of 2026 guidance, total constant currency revenue growth is expected to exit 2026 in the mid-teens, and Insulet's objective is to deliver 2027 growth consistent with or better than that exit rate, supported by new product launches and full Salesforce expansion benefits. This preliminary view does not include any benefits from the type 2 retention/onboarding improvement actions being implemented in 2026. - **Long-Term Outlook**: Management will update its long-range revenue outlook on the Q4 2026 earnings call to incorporate new type 2 market learnings. The company still expects long-term annual adjusted operating margin expansion of ~100 bps and adjusted EPS CAGR of over 25%, with continued strong free cash flow generation.

Segment performance

Total company revenue for Q2 2026 was $802 million, representing 23.5% year-over-year reported growth and 22.7% constant currency growth. US Omnipod revenue grew 20% year-over-year, contributing approximately 74% of total Omnipod revenue based on full-year guidance proportions. International Omnipod revenue grew over 35% year-over-year on a reported basis and 33% on a constant currency basis, contributing approximately 26% of total Omnipod revenue. Adjusted gross margin for the quarter was 72.9%, up 320 basis points year-over-year, driven by manufacturing productivity gains, positive pricing, and increased volume. Adjusted operating margin was 19.3%, up 140 basis points year-over-year. Adjusted EPS was $1.66, up 41.5% year-over-year from $1.17. Year-to-date free cash flow was $145 million.

Risks & headwinds

- Lower-than-expected retention and utilization among new type 2 diabetes customers in the first 90 days of therapy, which has reduced near-term revenue projections and requires adjustments to the commercial and customer support model. - Upcoming new competitor entry into the tubeless AID market, which could create pricing pressure or market share challenges. - Type 2 diabetes patients have unique characteristics (higher comorbidity rates, different payer mix, primary care as the dominant prescriber channel, differing emotional relationship to diabetes) that create onboarding and retention challenges that the company is still learning to address. - It will take multiple months to see if the implemented changes to the commercial model improve type 2 retention and utilization, creating near-term uncertainty around performance. There is risk that improvements do not materialize as quickly or as meaningfully as expected.

Analyst Q&A

• Q: What changed in the type 2 market since positive comments at ADA, how does the 2027 outlook account for upcoming competition and pricing pressure, and why are you confident growth can accelerate from the projected 2026 US exit rate? /

  A: Management acknowledges they should have identified type 2 onboarding and retention issues sooner. Clear lower-than-expected retention and utilization trends emerged in Q2 2026, concentrated in the first 90 days of therapy. This is an execution issue in serving the new type 2 segment, not caused by competition, pricing, or GLP-1s. The preliminary 2027 outlook contemplates upcoming competitive entry and assumes stable pricing, consistent with current market trends. Insulet remains confident in its differentiated product and innovation pipeline, and the preliminary outlook is prudent, not assuming any benefit from ongoing retention improvement actions.

• Q: Can you share specific metrics on the difference in 90-day retention between type 1 and type 2 customers, and what early success have you seen from your changes to improve these outcomes? /

  A: Management confirms modestly lower early retention and slightly lower utilization for type 2 relative to type 1 customers. Early data from the Omnipod Discover platform, which is already used by 1,600 clinicians and 12,000 patients, shows meaningfully improved retention and satisfaction among users. Proactive scaled support for key early milestones (first pod change, first prescription refill, insurance navigation) has shown positive early results in pilot programs, giving management confidence the broader set of changes will drive improvement.

• Q: How are you balancing Type 2 investment spending with profitability goals, given the new retention dynamics that change near-term returns? /

  A: Management reaffirms that the Type 2 market is strategically important and attractive long-term. The actions being implemented to improve retention are being funded through existing operational efficiencies, so there is no net incremental cost to the business. Lifetime value metrics are less attractive in the short term due to lower retention, but the long-term opportunity remains strong, and the upcoming fully closed-loop Type 2 product is expected to meaningfully improve both lifetime value and cost-to-serve metrics.

• Q: Is the core challenge retention (patients dropping off) or utilization (patients staying on but using less product), and how does retention differ between endocrinologist and primary care prescribed patients? /

  A: Management confirms the primary issue is retention, with only a modest utilization impact. Retention is stronger for patients prescribed by endocrinologists, who are more familiar with AID therapy, than for those prescribed by primary care providers. The company's recent Salesforce expansion increases outreach and support for primary care providers, and Omnipod Discover builds provider confidence for both specialties, which is expected to improve outcomes across all prescriber types.