INSULET CORP
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
PODD$146.51-6.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001145197-24-000022
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001145197-24-000039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 115 previous paragraphs and 124 current paragraphs.
78 unchanged; 30 reworded; 12 added; 7 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 6 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
In June 2024, we submitted our 510(k) for an expanded indication of Omnipod 5 for type 2 diabetes to the U.S. Food and Drug Administration (“FDA”) for 510(k) clearance. Due to the positive results of our Omnipod 5 type 2 pivotal trial and the learnings from our Omnipod GO pilot, we made a strategic decision to drive growth in the type 2 diabetes market with Omnipod 5 and, accordingly, during the second quarter, we decided not to move forward with the commercialization of Omnipod GO.
Current report
During the three and six months ended June 30, 2024, we recorded a charge of $13.5 million related to certain inventory components which we no longer expect to utilize following the strategic decision to not move forward with the commercialization of Omnipod GO discussed above.
Current report
Total revenue for the three months ended June 30, 2024 increased $92.0 million, or 23.2%, to $488.5 million, compared with $396.5 million for the three months ended June 30, 2023. Total revenue for the six months ended June 30, 2024 increased $175.6 million, or 23.3%, to $930.2 million, compared with $754.6 million for the six months ended June 30, 2023. Constant currency revenue growth of 23.4% and 23.1% for the three and six months ended June 30, 2024, respectively, was primarily drivenby higher volume largely attributable to our growing customer base. A higher average selling price, in part due to growth in the pharmacy channel, also contributed to the increase in revenue for both periods, although to a lesser extent.
Current report
Revenue from the sale of Omnipod products in our international markets increased $24.4 million, or 23.5%, to $128.1 million for the three months ended June 30, 2024, compared with $103.7 million for the three months ended June 30, 2023. Excluding the 0.9% unfavorable impact of currency exchange, the remaining 24.4% increase in revenue wasprimarily due to higher volumes from the launch of Omnipod 5 in the U.K. and Germany, including the favorable impact of conversions to Omnipod 5 as users in these countries generally obtain both their starter kit and refills simultaneously. A higher average selling price for Omnipod 5, compared with Omnipod DASH and Classic Omnipod, was largely offset by the timing of revenue recognition related to deferrals associated with our DASH MDC and a technology upgrade program in prior year.
Current report
For full year 2024, we expect higher International Omnipod revenue primarily due to last year's Omnipod 5 launches in the U.K. and Germany.
Current report
Drug Delivery revenue for the three months ended June 30, 2024 was $8.1 million, compared with $16.0 million for the three months ended June 30, 2023. The $7.9 million decrease is driven by lower volume due to a decrease in orders from our partner. A reimbursement from our partner to cover a portion of our increased production costs in the prior year, which did not repeat in the current year, also contributed to the decrease, although to a lesser extent.
Current report
Costs and Expenses
Current report
Cost of revenue for the three months ended June 30, 2024 increased $26.0 million, or 19.8%, to $157.6 million, compared with $131.6 million for the three months ended June 30, 2023. Gross margin was 67.7% for the three months ended June 30, 2024, compared with 66.8% for the three months ended June 30, 2023. The 90 basis point increase in gross margin was primarily drivenby pricing benefits in both the U.S. pharmacy channel and in our international markets and improved manufacturing efficiencies. These increases were partially offset by a $13.5 million charge related to certain components utilized in Omnipod GO, which we decided not to commercialize.
Current report
Our effective tax rate was a tax benefit of 269.2% and 126.6% for the three and six months ended June 30, 2024, respectively, compared with a tax provision of 4.2% and 3.8% for the three and six months ended June 30, 2023, respectively. The decreases in the effective tax rates for both periods were primarily due to tax benefits related to the release of the majority of our valuation allowance against deferred tax assets, which resulted in a non-cash tax benefit of $146.9 million and $153.5 million for the three and six months ended June 30, 2024, respectively. Additionally, both the three and six months ended June 30, 2024 include a $4.8 million discrete tax benefit associated with a U.S. federal research and development tax credit recovery project for tax years 2017 through 2021. These tax benefits were partially offset by higher pre-tax income in the current periods, compared with the prior year.
Current report
The amount of the deferred tax asset considered realizable can change if estimates of future taxable income are revised. Refer to Note 15 for additional information regarding the release of our valuation allowance.
Current report
(2) Represents non-operating loss related to fair value adjustment of strategic debt investment.
Current report
Proceeds from Option Exercises and Shares Issued Under Employee Stock Purchase Plan ("ESPP")—Total proceeds from option exercises and issuance of shares under the ESPP were $12.9 million and $17.8 million for the six months ended June 30, 2024 and 2023, respectively. The $4.9 million decrease was primarily driven by option exercises by former executives in the prior year.
Removed paragraphs (7)
Previous report
We are also preparing for an expanded indication for Omnipod 5 for type 2 users. In March 2024, the last participant completed our type 2 pivotal trial. We expect to submit the results to the U.S. Food and Drug Administration (“FDA”) for an expanded indication by the end of 2024.
Previous report
Total revenue for the three months ended March 31, 2024 increased $83.6 million, or 23.3%, to $441.7 million, compared with $358.1 million for the three months ended March 31, 2023. Constant currency revenue growth of 22.8% was primarily drivenby higher volume and, to a lesser extent, favorable sales channel mix and increased drug delivery revenue.
Previous report
For full year 2024, we expect higher International Omnipod revenue due to continued volume growth driven by new customers and conversions to Omnipod 5 in the U.K. and Germany. We expect these increases to be partially offset by higher attrition in countries where we have not yet launched Omnipod 5.
Previous report
Operating Expenses
Previous report
Income tax expense was $3.4 million on pre-tax income of $54.9 million for the three months ended March 31, 2024, and $0.8 million on pre-tax income of $24.6 million for the three months ended March 31, 2023. Our effective tax rate was 6.2% and 3.4% for the three months ended March 31, 2024 and 2023, respectively. The 280 basis point increase in the effective tax rate primarily resulted from changes in the distribution of income among the jurisdictions in which we operate and a corresponding reduction to available net operating loss carryforwards that reduce taxable income.
Previous report
As of March 31, 2024, we maintain a full valuation allowance against our net deferred tax assets in the U.S. and the U.K. Given our positive trend in earnings and anticipated future earnings, we believe there is a reasonable possibility that during 2024, sufficient positive evidence will exist to allow us to reach a conclusion that our valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of approximately $200 million of deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded.
Previous report
Proceeds from Option Exercises—Proceeds from option exercises were $5.8 million and $6.0 million for the three months ended March 31, 2024 and 2023, respectively.
Reworded paragraphs (30)
Previous wording
Our mission is to improve the lives of people with diabetes. We are primarily engaged in the development, manufacture and sale of our proprietary Omnipod platform, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod platform includes: Classic Omnipod, its next generation Omnipod DASH, the most recent generation Omnipod 5, and our latest innovation, Omnipod GO, all of which eliminate the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing. Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like Personal Diabetes Manager (“PDM”) with a color touch screen user interface. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system, that integrates with continuous glucose monitors (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. The CGMs are sold separately by third parties. Omnipod GO, for which we are currently conducting a pilot program in the United States, is our basal-only Pod for individuals with type 2 diabetes aged 18 and older who require insulin.
Current wording
Our mission is to improve the lives of people with diabetes. We are primarily engaged in the development, manufacture and sale of our proprietary Omnipod platform, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod platform includes: the most recent generation Omnipod 5 and its predecessors Omnipod DASH and Classic Omnipod, all of which eliminate the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system, that integrates with continuous glucose monitors (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. The CGMs are sold separately by third parties. Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like Personal Diabetes Manager (“PDM”) with a color touch screen user interface.
Previous wording
Our financial objective is to sustain profitable growth. To achieve this, we launched Omnipod 5 in the United States in 2022, and in the United Kingdom and Germany in June and August 2023, respectively. Most recently, in April 2024, we launched our limited market release of Omnipod 5 in the Netherlands. We are working on further building our international teams and advancing our regulatory, reimbursement, and market development efforts so we can bring Omnipod 5 to additional international markets.
Current wording
Our financial objective is to sustain profitable growth. To achieve this, we launched Omnipod 5 in the United States in 2022, and in the United Kingdom and Germany in June and August 2023, respectively. Most recently, in June 2024, we launched our full market releases of Omnipod 5 in the Netherlands and France. We are working on further building our international teams and advancing our regulatory, reimbursement, and market development efforts so we can bring Omnipod 5 to additional international markets.
Previous wording
Additionally, we recently completed participant enrollment in our RADIANT study in France, the U.S, and Belgium, which is our Omnipod 5 with Libre 2 randomized controlled trial. Similar to the randomized control trial that we completed in the U.S. and France for Omnipod 5 with DexCom’s G6 CGM, the objective is to provide data to support our pricing and market access initiatives as we roll out Omnipod 5 with multiple sensors across our international markets.
Current wording
During the six months ended June 30, 2024, we completed participant enrollment in our RADIANT study in France, the U.S, and Belgium, which is our Omnipod 5 with Libre 2 randomized controlled trial. Similar to the randomized control trial that we completed in the U.S. and France for Omnipod 5 with DexCom’s G6 CGM, the objective is to provide data to support our pricing and market access initiatives as we roll out Omnipod 5 with multiple sensors across our international markets.
Previous wording
We also continue to focus on our product development efforts, including automated insulin delivery (“AID”) offerings, such as choice of smartphone integration and CGM, and enhancing the customer experience through digital product and data capabilities. In February 2024, we began our limited market release of Omnipod 5 with Dexcom’s G7 CGM in the United States, Similarly, in April 2024 we launched a limited market release of Omnipod 5 with Libre 2 Plus for individuals aged two years and older with type 1 diabetes in both the U.K. and the Netherlands, where we now offer sensor of choice (integration with either Abbott’s Freestyle Libre 2 Plus sensor or Dexcom’s G6 CGM). Additionally, we plan to launch a limited market release of Omnipod 5 with our iOS app for iPhone in the U.S. this year.
Current wording
We also continue to focus on our product development efforts, including automated insulin delivery (“AID”) offerings, such as choice of smartphone integration and CGM, and enhancing the customer experience through digital product and data capabilities. In June 2024, we began our full market release of Omnipod 5 with Dexcom’s G7 CGM in the United States. Similarly, in June 2024 we launched our full market release of Omnipod 5 with Libre 2 Plus for individuals aged two years and older with type 1 diabetes in both the U.K. and the Netherlands, where we now offer sensor of choice (integration with either Abbott’s Freestyle Libre 2 Plus sensor or Dexcom’s G6 CGM). Dexcom’s G6 CGM is also available in the UK and Germany. Additionally, in June 2024, we launched a limited market release of Omnipod 5 with our iOS app for iPhone in the United States.
Previous wording
Finally, we continue to take steps to strengthen our global manufacturing capabilities. We are in the final stages of validating our manufacturing lines at our newly constructed manufacturing plant in Malaysia and expect to being producing salable product in 2024. This plant provides us with increased capacity to satisfy our growing demand, supports our international expansion strategy, and is expected to drive higher gross margins over time. We plan to begin production at this facility in 2024.
Current wording
Finally, we continue to take steps to strengthen our global manufacturing capabilities. During the three months ended June 30, 2024, we began producing sellable product at our newly constructed manufacturing plant in Malaysia. This plant provides us with increased capacity to satisfy our growing demand, supports our international expansion strategy, and is expected to drive higher gross margins over time.
Previous wording
Revenue from the sale of Omnipod products in the U.S. for the three months ended March 31, 2024 included $111.8 million of related party revenue, compared with $96.8 million for the three months ended March 31, 2023. The $15.0 million increase resulted from growth through the pharmacy channel.
Current wording
Revenue from the sale of Omnipod products in the U.S. increased $75.5 million, or 27.3%, to $352.3 million for the three months ended June 30, 2024, compared with $276.8 million for the three months ended June 30, 2023. This increase primarily resulted from higher volume driven by growing our customer base, somewhat offset by a decrease in estimated inventory days-on-hand at distributors as we manage the transition from Omnipod G6 Pods to G7 Pods in the distribution channel. To a lesser extent, the revenue increase was driven by a higher average selling price, in part due to growth in the pharmacy channel. Revenue from the sale of Omnipod products in the U.S. for the three months ended June 30, 2024 included $147.3 million of related party revenue, compared with $109.2 million for the three months ended June 30, 2023. The $38.1 million increase resulted from growth through the pharmacy channel.
Previous wording
Revenue from the sale of Omnipod products in the U.S. increased $58.7 million, or 22.7%, to $317.7 million for the three months ended March 31, 2024, compared with $259.0 million for the three months ended March 31, 2023. This increase primarily resulted from higher volume through the pharmacy channel driven by growing our customer base and, to a lesser extent, a higher average selling price. These increases were partially offset by a decrease in estimated inventory days-on-hand at distributors, and lower conversions to Omnipod 5. We experienced a significant benefit from conversions to Omnipod 5 in the prior year following the launch of the product in the latter half of 2022 since users generally fill both their Omnipod 5 starter kit and their first month of refills simultaneously.
Current wording
Revenue from the sale of Omnipod products in the U.S. increased $134.2 million, or 25.0%, to $670.0 million for the six months ended June 30, 2024, compared with $535.8 million for the six months ended June 30, 2023. This increase primarily resulted from higher volume through the pharmacy channel driven by growing our customer base, partially offset by a decrease in estimated inventory days-on-hand at distributors and lower conversions to Omnipod 5 since the vast majority of U.S. conversions to Omnipod 5 occurred in 2023. We experienced a benefit from conversions to Omnipod 5 in the prior year following the launch of the product in the latter half of 2022 since users generally fill both their Omnipod 5 starter kit and their first month of refills simultaneously. To a lesser extent, the revenue increase was driven by a higher average selling price, in part due to growth in the pharmacy channel. Revenue from the sale of Omnipod products in the U.S. for the six months ended June 30, 2024 included $259.1 million of related party revenue, compared with $206.0 million for the six months ended June 30, 2023. The $53.1 million increase resulted from growth through the pharmacy channel.
Previous wording
For full year 2024, we expect strong U.S. revenue growth driven by continued volume growth of Omnipod 5, the benefits of our recurring revenue model and, to a lesser extent, higher average selling prices of Omnipod 5. We expect these increases to be partially offset by a decrease in estimated inventory days-on-hand at distributors and lower conversions from Classic Omnipod and Omnipod DASH to Omnipod 5 since the vast majority of U.S. conversions to Omnipod 5 occurred in 2023.
Current wording
For full year 2024, we expect strong U.S. revenue growth primarily driven by continued volume growth of Omnipod 5 due to an increase in our customer base and the benefits of our recurring revenue model, partially offset by a decrease in estimated inventory days-on-hand at distributors. A higher average selling price for Omnipod 5, due in part to growth in the pharmacy channel, is also expected to contribute to the year over year increase in revenue.
Previous wording
Revenue from the sale of Omnipod products in our international markets increased $16.7 million, or 16.9%, to $115.3 million for the three months ended March 31, 2024, compared with $98.6 million for the three months ended March 31, 2023. Excluding the 2.1% favorable impact of currency exchange, the remaining 14.8% increase in revenue wasprimarily due to higher volumes from the launch of Omnipod 5 in the U.K. and Germany, and to a lesser extent, a higher average selling price of Omnipod 5 compared with Omnipod DASH and Classic Omnipod. These increases were partially offset by higher attrition in the countries where we have not yet launched Omnipod 5 as we continue to be impacted by competition from AID systems.
Current wording
Revenue from the sale of Omnipod products in our international markets increased $41.1 million, or 20.3%, to $243.4 million for the six months ended June 30, 2024, compared with $202.3 million for the six months ended June 30, 2023. Excluding the 0.6% favorable impact of currency exchange, the remaining 19.7% increase in revenue wasprimarily due to higher volumes from the launch of Omnipod 5 in the U.K. and Germany, including the favorable impact of conversions to Omnipod 5. A higher average selling price for Omnipod 5 compared with Omnipod DASH and Classic Omnipod also contributed to the revenue increase, although to a lesser extent.
Previous wording
Substantially all of our Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy. Drug Delivery revenue for the three months ended March 31, 2024 was $8.7 million, compared with $0.5 million for the three months ended March 31, 2023. The $8.2 million increase is driven by higher volume resulting from timing of production in the prior year. For full year 2024, we expect Drug Delivery revenue to decline $18 million to $22 million due to a lower forecast from our partner and a lower selling price.
Current wording
Drug Delivery revenue of $16.8 million for the six months ended June 30, 2024 was relatively level with $16.5 million for the six months ended June 30, 2023 as the increase in orders from our partner was offset by the reimbursement from our partner in the prior year, which did not repeat in the current year. For full year 2024, we expect Drug Delivery revenue to decline in the range of $14 million to $18 million due to a lower forecast from our partner and a lower selling price.
Previous wording
Cost of revenue for the three months ended March 31, 2024 increased $17.3 million, or 14.7%, to $134.9 million, compared with $117.6 million for the three months ended March 31, 2023. Gross margin was 69.5% for the three months ended March 31, 2024, compared with 67.2% for the three months ended March 31, 2023. The 230 basis point increase in gross margin was primarily drivenby higher average selling prices and improved manufacturing efficiencies. These increases were partially offset byan$8.0 million, or 220 basis point warranty accrual reversal during thethree months ended March 31, 2023 associated with the voluntary Medical Device Correction(“MDC”)notices we issued in 2022, which did not recur in the current period.
Current wording
Cost of revenue for the six months ended June 30, 2024 increased $43.3 million, or 17.4%, to $292.5 million, compared with $249.2 million for the six months ended June 30, 2023. Gross margin was 68.6% for the six months ended June 30, 2024, compared with 67.0% for the six months ended June 30, 2023. The 160 basis point increase in gross margin was primarily drivenby pricing benefits in both the U.S. pharmacy channel and in our international markets and improved manufacturing efficiencies. These increases were partially offset by the $13.5 million charge related to the discontinuance of Omnipod GO discussed above and an$8.8 million accrual reversal during thesix months ended June 30, 2023 associated with the voluntary Medical Device Correction(“MDC”)notices we issued in 2022, which did not recur in the current period.
Previous wording
For full year 2024, we expect gross margin to be in the range of 68% to 69%. We anticipate gross margin to be relatively level due to higher average selling prices and improved manufacturing efficiencies, partially offset by $11.5 million of income associated with a reduction to our warranty accrual in 2023 associated with the voluntary MDC notices issued in 2022, which will not recur, and higher costs associated with our new product launches.
Current wording
For full year 2024, we expect gross margin to be in the range of 68% to 69%. We anticipate gross margin to increase due to higher average selling prices and improved manufacturing efficiencies. These increases will be partially offset by the $13.5 million charge related to certain components utilized in Omnipod GO and $11.5 million of income in the prior year associated with a reduction to our MDC warranty accrual, which will not recur in the current year.
Previous wording
Research and development expenses of $50.2 million for the three months ended March 31, 2024 were level with the three months ended March 31, 2023. Research and development expenses as a percent of revenue declined to 11.4% for the three months ended March 31, 2024, compared with 14.0% for the three months ended March 31, 2023, primarily due to an increase in sustaining costs following the launch of Omnipod 5 in the United States and Europe, which are included in selling, general and administrative expenses. We expect research and development spending for the full year 2024 to increase compared with 2023 as we continue to invest in advancing our innovation and clinical pipeline.
Current wording
Research and development expenses of $104.1 million for the six months ended June 30, 2024 were relatively level with the six months ended June 30, 2023. Research and development expenses as a percent of revenue declined to 11.2% for the six months ended June 30, 2024, compared with 13.9% for the six months ended June 30, 2023, primarily due to an increase in sustaining costs following the launch of Omnipod 5 in the United States and Europe, which are included in selling, general and administrative expenses. We expect research and development spending for the full year 2024 to increase compared with 2023 as we continue to invest in advancing our innovation and clinical pipeline.
Previous wording
Selling, general and administrative expenses for the three months ended March 31, 2024 increased $37.0 million, or 22.7%, to $199.7 million, compared with $162.7 million for the three months ended March 31, 2023. This increase was primarily attributable to year-over-year headcount additions to support commercial operations and international growth, as well as our new organizational structure that is designed to accelerate innovation and commercialization. To a lesser extent, the increase was due to higher costs associated with the continued commercial rollout of Omnipod 5 in international markets, as well as higher legal fees and consulting costs to support our business growth. These increases were partially offset by a decrease in direct-to-consumer advertising spend.
Current wording
Selling, general and administrative expenses for the six months ended June 30, 2024 increased $80.7 million, or 23.6%, to $422.1 million, compared with $341.4 million for the six months ended June 30, 2023. This increase was primarily attributable to year-over-year headcount additions due to an increase in sustaining costs, also to support commercial and international growth, as well as our new organizational structure. To a lesser extent, the increase was due to higher legal fees and consulting costs to support our business growth, and higher costs associated with the continued commercial rollout of Omnipod 5 in international markets.
Previous wording
Interest expense for the three months ended March 31, 2024 increased $1.3 million to $10.7 million, compared with $9.4 million for the three months ended March 31, 2023. This increase was primarily driven by fees paid associated with amending our Term Loan in January 2024, which is discussed in Note 9 to our consolidated financial statements.
Current wording
Interest expense for the three months ended June 30, 2024 increased $1.3 million to $11.0 million, compared with $9.7 million for the three months ended June 30, 2023. Interest expense for the six months ended June 30, 2024 increased $2.6 million to $21.7 million, compared with $19.1 million for the six months ended June 30, 2023. The increases for both periods were primarily associated with our equipment financings. The increase for the six months ended June 30, 2024 was also due to fees paid to amend our Term Loan in January 2024, which is discussed in Note 9 to our consolidated financial statements.
Previous wording
Interest income for the three months ended March 31, 2024 increased $2.9 million to $9.4 million, compared with $6.5 million for the three months ended March 31, 2023. This increase was primarily driven by higher interest rates and increased average cash balances.
Current wording
Interest income for the three months ended June 30, 2024 increased $2.0 million to $9.3 million, compared with $7.3 million for the three months ended June 30, 2023. Interest income for the six months ended June 30, 2024 increased $4.9 million to $18.7 million, compared with $13.8 million for the six months ended June 30, 2023. The increases for both the three and six months ended June 30, 2024 was primarily driven by higher interest rates and increased average cash balances.
Previous wording
In 2021, the Organization for Economic Co-operation and Development (“OECD”) and G20 international forum released the Model Global Anti-Base Erosion (GloBE) rules (“Model Rules”) under Pillar Two. These Model Rules set forth the common approach for a Global Minimum Tax at 15% for multinational enterprises with revenue greater than €750 million and is expected to be applicable to Insulet. In December 2022, Pillar Two was adopted by the Council of the European Union for implementation by European Union member states by December 31, 2023, with effect for tax years beginning in calendar year 2024. Similar directives under Pillar Two are already adopted or expected to be adopted by taxing authorities in other countries where Insulet has business operations, with widespread implementation of the Global Minimum Tax in calendar years 2024 and 2025. While we currently do not expect the Model Rules for Pillar Two and related legislation to have a significant impact on our financial statements, we are continuing to evaluate their potential impact.
Current wording
In 2021, the Organization for Economic Co-operation and Development (“OECD”) and G20 international forum released the Model Global Anti-Base Erosion (GloBE) rules (“Model Rules”) under Pillar Two. These Model Rules set forth the common approach for a Global Minimum Tax at 15% for multinational enterprises with revenue greater than €750 million and is expected to be applicable to Insulet. Pillar Two has been adopted by the Council of the European Union for implementation by European Union member states by December 31, 2023, with effect for tax years beginning 2024. Similar directives under Pillar Two are already adopted or expected to be adopted by taxing authorities in other countries where Insulet has business operations, with widespread implementation of the Global Minimum Tax in calendar years 2024 and 2025. While we currently do not expect the Model Rules for Pillar Two and related legislation to have a significant impact on our financial statements, we are continuing to evaluate their potential impact.
Previous wording
Adjusted EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and other significant transactions or events, such as legal settlements, medical device corrections, gains (losses) on investments, and loss on extinguishment of debt, that affect the period-to-period comparability of our performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our performance, and we believe that it is helpful to investors and other interested parties as a measure of our comparative performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.
Current wording
Adjusted EBITDA represents net income plus net interest expense (income), income tax expense (benefit), depreciation and amortization, stock-based compensation expense and other significant transactions or events, such as legal settlements, medical device corrections, gains (losses) on investments, and loss on extinguishment of debt, that affect the period-to-period comparability of our performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our performance, and we believe that it is helpful to investors and other interested parties as a measure of our comparative performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.
Previous wording
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.
Current wording
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-
Previous wording
Net cash provided by operating activities of $87.6 million for the three months ended March 31, 2024 was primarily attributable to net income, as adjusted for depreciation and amortization, and stock-based compensation expense. The working capital cash outflow was negligible as the $55.5 million increase in accounts payable and $36.6 million decrease in accounts receivable were almost entirely offset by a $62.3 million decrease in accrued expenses and other liabilities and a $29.6 million increase in inventories. The increase in accounts payable was primarily driven by the timing of payments. The decrease in accounts receivable was primarily due to a decrease in revenue compared to the fourth quarter of 2023 driven by seasonality. The decrease in accrued expenses and other liabilities was primarily driven by the annual payout of cash bonuses for performance in the prior year and a decrease in accrued rebates mainly due to lower revenue subject to pharmacy rebates during the three months ended March 31, 2024. Finally, the increase in inventories was primarily driven by a planned inventory build, primarily raw materials, to satisfy demand and mitigate supply chain risk.
Current wording
Net cash provided by operating activities of $184.1 million for the six months ended June 30, 2024 was primarily attributable to net income, as adjusted for deferred income taxes, depreciation and amortization, stock-based compensation expense. A $56.4 million increase in accounts payable was mostly offset by a $30.3 million increase in inventories, a $15.7 million increase in prepaid expenses and other assets and a $14.0 million decrease in accrued expenses and other liabilities. The increase in accounts payable was driven by the timing of payments. The increase in inventories was primarily due to a planned inventory build to satisfy our growing demand and, to a lesser extent, to mitigate supply chain risk. The increase in prepaid expenses and other assets was primarily driven by an increase in other receivables. Finally, the decrease in accrued expenses and other liabilities was primarily driven by the annual payout of cash bonuses for performance in the prior year and a decrease in accrued rebates mainly due to lower revenue subject to pharmacy rebates during the six months ended June 30, 2024.
Previous wording
Net cash used in investing activities was $24.0 million for the three months ended March 31, 2024, compared with $42.1 million for the three months ended March 31, 2023.
Current wording
Net cash used in investing activities was $48.9 million for the six months ended June 30, 2024, compared with $65.2 million for the six months ended June 30, 2023.
Previous wording
Capital Spending—Capital expenditures were $22.1 million and $10.5 million for the three months ended March 31, 2024 and 2023, and primarily related to the purchase of equipment to increase our manufacturing capacity. We expect capital expenditures for 2024 to increase compared with 2023 given the timing of spending on machinery, equipment and tooling for our new Malaysia manufacturing facility and to support continuous improvement efforts in our other manufacturing locations. To a lesser extent, we expect capital expenditures to increase due to investments in our information technology infrastructure. We expect to fund our capital expenditures using existing cash.
Current wording
Capital Spending—Capital expenditures were $44.6 million and $26.2 million for the six months ended June 30, 2024 and 2023, respectively, and primarily related to the purchase of equipment to increase our manufacturing capacity. We expect capital expenditures for 2024 to increase compared with 2023 given the timing of spending on machinery, equipment and tooling for our new Malaysia manufacturing facility and to support continuous improvement efforts in our other manufacturing locations. To a lesser extent, we expect capital expenditures to increase due to investments in our information technology infrastructure. We expect to fund our capital expenditures using existing cash.
Previous wording
Investments in Developed Software—Investments in developed software were $1.9 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively, and primarily related to investments in projects to support our cloud-based capabilities.
Current wording
Investments in Developed Software—Investments in developed software were $4.3 million and $3.9 million for the six months ended June 30, 2024 and 2023, respectively, and primarily related to investments in projects to support our cloud-based capabilities.
Previous wording
Acquisitions and Investments—During the three months ended March 31, 2023, we paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based AID technologies. We also paid a purchase price holdback of $3.0 million associated with our 2022 acquisition of substantially all the assets related to the manufacture and production of shape-memory alloy wire assemblies used in the production of our product from Dynalloy, Inc. Additionally, during the three months ended March 31, 2023, we made a $2.0 million strategic investment in a private company.
Current wording
Acquisitions and Investments—During the six months ended June 30, 2023, we paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based AID technologies. We also paid a purchase price holdback of $3.0 million associated with our 2022 acquisition of substantially all the assets related to the manufacture and production of shape-memory alloy wire assemblies used in the production of our product from Dynalloy, Inc. Additionally, during the six months ended June 30, 2023, we made strategic investments in private companies in the amount of $7.0 million.
Previous wording
Net cash used in financing activities was $14.1 million for the three months ended March 31, 2024, compared with $12.1 million for three months ended March 31, 2023.
Current wording
Net cash used in financing activities was $15.0 million for the six months ended June 30, 2024, compared with $8.9 million for six months ended June 30, 2023.
Previous wording
Debt Repayments—During the three months ended March 31, 2024, we made $9.1 million in aggregate principal payments on our equipment financings, term loan, and mortgage, compared with $6.7 million during the three months ended March 31, 2023.
Current wording
Debt Repayments—During the six months ended June 30, 2024, we made $15.9 million in aggregate principal payments on our equipment financings, term loan, and mortgage, compared with $13.5 million during the six months ended June 30, 2023.
Previous wording
Finance Lease Repayments—During the three months ended March 31, 2024, we made $5.8 million in finance lease repayments associated with our Malaysia manufacturing facility.
Current wording
Finance Lease Repayments—During the six months ended June 30, 2024, we made $5.9 million in finance lease repayments associated with our Malaysia manufacturing facility.
Previous wording
Payment of Taxes for Restricted Stock Net Settlements—Payments for taxes related to net restricted and performance stock unit settlements were $5.0 million and $11.4 million for the three months ended March 31, 2024 and 2023, respectively. The $6.4 million decrease was primarily driven by a lower fair market value of the restricted stock units that vested during the period.
Current wording
Payment of Taxes for Restricted Stock Net Settlements—Payments for taxes related to net restricted and performance stock unit settlements were $6.1 million and $12.9 million for the six months ended June 30, 2024 and 2023, respectively. The $6.8 million decrease was primarily driven by a lower fair market value of the restricted stock units that vested during the period.
Previous wording
As of March 31, 2024, we had $19.8 million of letters of credit outstanding, primarily under our $20.0 million uncommitted letter of credit facility to backstop bank guarantees for the same amount. The bank guarantees primarily serve as security for our newly constructed manufacturing building in Malaysia until we purchase the property. We pay interest on outstanding borrowings and commitment fees on the maximum amount available to be drawn under the letters of credit at a rate of between 1.65% and 2.25%, depending on our credit rating. The letters of credit include customary covenants, none of which are considered restrictive to our operations. We had letters of credit outstanding totaling $20.9 million as of December 31, 2023.
Current wording
As of June 30, 2024, we had $16.8 million of letters of credit outstanding, primarily under our $20.0 million uncommitted letter of credit facility to backstop bank guarantees for the same amount. The bank guarantees primarily serve as security for our newly constructed manufacturing building in Malaysia until we purchase the property. We pay interest on outstanding borrowings and commitment fees on the maximum amount available to be drawn under the letters of credit at a rate of between 1.65% and 2.25%, depending on our credit rating. The letters of credit include customary covenants, none of which are considered restrictive to our operations. We had letters of credit outstanding totaling $20.9 million as of December 31, 2023.
Previous wording
•risks related to the conversion of outstanding Convertible Senior Notes; and
Current wording
•risks related to the conversion of outstanding Convertible Notes; and
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Substantially all of our Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy.
Current report — wording carried from elsewhere
Research and development expenses of $53.9 million for the three months ended June 30, 2024 were relatively level with the three months ended June 30, 2023. Research and development expenses as a percent of revenue declined to 11.0% for the three months ended June 30, 2024, compared with 13.9% for the three months ended June 30, 2023, primarily due to an increase in sustaining costs following the launch of Omnipod 5 in the United States and Europe, which are included in selling, general and administrative expenses.
Current report — wording carried from elsewhere
Selling, general and administrative expenses for the three months ended June 30, 2024 increased $43.7 million, or 24.5%, to $222.4 million, compared with $178.7 million for the three months ended June 30, 2023. This increase was primarily attributable to year-over-year headcount additions due to an increase in sustaining costs, also to support commercial and international growth, as well as our new organizational structure that is designed to accelerate innovation and commercialization. To a much lesser extent, the increase was due to an increase in direct-to-consumer advertising spend and higher legal fees.
Current report — wording carried from elsewhere
GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.