Insulet Corporation 2026 Q2 Earnings Call

Good morning, and welcome to our second 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 second quarter results, along with our financial outlook for the third quarter and full year 2026. With that, let me start our prepared remarks by reminding everyone that certain statements, including comments regarding our financial outlook, the anticipated impact of our strategic actions, the potential impact of various regulatory and operational matters, and the macroeconomic environment on our results of operations, contain forward-looking statements that involve risks and uncertainties. Of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially.

In addition, on today's call, non-GAAP financial measures will be used to help investors understand Insulet's ongoing business performance, including adjusted operating income, adjusted EPS, adjusted EBITDA, adjusted tax rate, and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. A reconciliation of certain non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and 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 questions. Now I'd like to turn the call over to Ashley.

Ashley? Good morning, everyone, and thank you for joining us.

We delivered another quarter of strong revenue growth, expanding profitability, and solid cash flow generation. Our performance reflected the strength of our differentiated business model and our team's dedication to improving the lives of people with diabetes around the world. Total company revenue grew 23% year-over-year on a constant currency basis, exceeding our expectations. We saw strong demand for Omnipod across both the U.S. and international markets, along with a benefit from favorable price mix. Importantly, we delivered growth this quarter while continuing to meaningfully improve profitability. Second quarter adjusted operating margin increased 140 basis points year-over-year, supported by increased manufacturing productivity and the benefits of scale. Adjusted earnings per share increased approximately 42%, driven by our strong revenue growth and disciplined operating performance. Demand remained healthy with new customer starts rebounding from the seasonal slowdown in quarter 1.

Global new customer starts increased both sequentially and year-over-year, resulting in our second highest quarter ever and contributing to 23% growth in our global customer base. In the U.S., we continued to source more than 85% of new customer starts from MDI users, and over 40% of new customer starts were people with type 2 diabetes. Internationally, Omnipod 5 became the number one insulin pump for new users in Australia. We also recently launched in Spain, marking our entry into an important new market and further expanding our global reach. We continued to expand our prescriber base with more than 32,000 healthcare providers in the U.S. now prescribing Omnipod, up 27% year-over-year. This growing provider adoption reflects our success in expanding awareness of AID and broadening access to Omnipod across both type 1 and type 2 diabetes.

At the same time, this quarter has reinforced that we are still learning how to best serve the type 2 market. While we have more than 25 years of experience serving people with type 1 diabetes, we are still in the early stages of bringing Omnipod 5 to the type 2 community. As we've gained more experience in the type 2 market, we've developed a deeper understanding of the unique needs and behaviors of these podders. We recognize that we need to adapt our commercial model to better serve this community. Specifically, we are seeing lower rates of utilization and retention among type 2 customers, and these trends were more pronounced this quarter than we anticipated. As we've gathered additional data and experience, we have a better understanding of these dynamics and are now incorporating learnings into our assumptions and outlook.

Over the past nine months, we have driven significant growth in our type 2 starts, particularly through our DTC activations and sampling programs. Both initiatives have proven effective in getting people started. However, getting started is not enough. Customers, particularly type 2 customers, need more support to get fully onboarded and for continuity of therapy. The first 90 days on therapy are critical for helping patients become comfortable and confident with the technology and to establish the habits and practices that then lead them to realize the full benefit of Omnipod. There are a number of key moments when our teams need to provide type 2 podders with a more personal, higher touch support, like when they're onboarding, their first pod activation, their first pod change, and the first time that they're refilling their prescription.

As a result, we're taking a number of actions to enhance our commercial model and customer support. First, we are expanding our customer care team that supports the onboarding experience, including helping customers navigate the insurance process. Second, we're changing our sales force compensation structure to prioritize and reward longer term retention, not just new customer starts. Third, we're refining our approach to how we deploy samples to better identify patients who are most likely to benefit from Omnipod and support these customers during the sample process to improve conversion, retention, and long-term success. And finally, we are rolling out new technology platforms like Omnipod Discover, which has shown promising early results during its limited market release. This cloud-based platform helps providers and patients identify trends, personalize therapy, and make more informed treatment decisions.

Early data is providing a glimpse into how Discover may positively influence both clinical outcomes and retention, giving us confidence in its ability to support long-term therapy success. Adoption of Omnipod Discover continues to grow. With more than 12,000 people with diabetes and over 1,600 healthcare professionals using the platform today. Alongside this progress, we are accelerating the development of a modern customer data and engagement platform. By bringing together the data across our interactions with healthcare professionals and patients, we're building a more complete 360-degree view of each customer. This will enable highly personalized, two-way engagement, allowing us to better anticipate needs, tailor support, and improve the overall customer experience. Over time, we expect these capabilities will help to optimize adoption, utilization, retention, and lifetime value while supporting better outcomes for the people we serve.

We're confident that over time, these actions will help improve long-term success for our type 2 podders. Importantly, our data show that once type 2 customers remain on Omnipod for the first 90 days, retention rates stabilize, a trend that we also see in our type 1 population as patients gain confidence with the technology and experience the benefits of Omnipod. That's why my conviction in the long-term type 2 opportunity remains high. While the ADA recommends AID as the standard of care, we've just begun the conversion process. Today, just over 5% of the approximately 2.5 million U.S. adult basal bolus insulin users have converted to AID. Additionally, there are approximately 3 million basal-only insulin users who may also benefit from AID therapy. While we're still in the very early stages of type 2 adoption, the opportunity is substantial with significant runway ahead.

Interest in Omnipod is strong among both patients and clinicians, which translated into healthy new customer starts, with type 2 representing more than 40% of new customer starts in the second quarter. As we refine our commercial and support model and leverage new technology platforms like Omnipod Discover, we believe we can drive better outcomes, improve retention, and expand AID adoption across this large and under-penetrated market. With that context, let me now turn to our updated outlook. We're updating our full year revenue outlook to incorporate the utilization and retention trends we are seeing within our type 2 customer base and to reflect the time required for the actions we are taking to translate into improved customer success. We now expect 2026 total company revenue growth of 20%-22% and U.S. Omnipod growth of 17%-19%. We are raising our international revenue growth outlook to 30%-32%, reflecting the strength of our first half performance and our sustained momentum.

As CEO, I take accountability for our reduced U.S. outlook. As we've gained experience in the type 2 market, we've developed a deeper understanding of certain dynamics that were not fully reflected in our initial planning assumptions. We should have identified the issue sooner, and I'm confident in our ability to better serve the type 2 community and in the long-term opportunity ahead. We're acting decisively to enhance our commercial and customer service model, and we will continue to be transparent about what we're learning and how those learnings shape our actions and outlook.

As we review our plans for 2027 and beyond, we believe it's appropriate to revisit certain assumptions underlying our longer-term revenue outlook, given the additional data and experience we've gained, particularly in the type 2 market. We expect to provide an updated view on our long-range outlook on our fourth quarter call. This will give us time to incorporate additional learnings from the actions that we're taking to improve outcomes for our type 2 customers. That said, while we're reassessing our specific long-range revenue growth expectations, we remain highly confident in the significant long-term opportunity ahead and our ability to create value over time. We continue to see a path to delivering top-tier revenue growth, meaningful margin expansion, strong earnings growth, and positive free cash flow generation. Importantly, we continue to have strong conviction in the long-term opportunity and in our ability to win in this market.