Deborah R. Gordon - Insulet Corp. Patrick J. Sullivan - Insulet Corp. Michael L. Levitz - Insulet Corp. Shacey Petrovic - Insulet Corp.

Margaret M. Kaczor - William Blair & Co. LLC David Ryan Lewis - Morgan Stanley & Co. LLC Danielle J. Antalffy - Leerink Partners LLC Michael Weinstein - JPMorgan Securities LLC Tao L. Levy - Wedbush Securities, Inc. Jeff D. Johnson - Robert W. Baird & Co., Inc. Raj Denhoy - Jefferies LLC Ryan Blicker - Cowen & Co. LLC Jayson T. Bedford - Raymond James & Associates, Inc. Suraj Kalia - Northland Securities, Inc.

Good day, ladies and gentlemen, and welcome to the Q2 2017 Insulet Corporation Earnings Conference 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. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. Deborah Gordon, Vice President of Investor Relations. Ma'am, you may begin. Deborah R. Gordon - Insulet Corp.: Thank you, Bruce. Good afternoon and thank you for joining us for our second quarter 2017 earnings call. Joining me today are Patrick Sullivan, Chairman and Chief Executive Officer; Shacey Petrovic, President and Chief Operating Officer; and Michael Levitz, Senior Vice President and Chief Financial Officer. The replay of this call will be archived on our website. Our press release discussing our second quarter 2017 results and third quarter and full year 2017 guidance is also available in the IR section of our website. Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and involves known and unknown risks and uncertainties that may cause actual results to be materially different from any future results implied by such statements. Such factors include those referenced in our Safe Harbor statement, in our second quarter earnings release and in the company's filings with the SEC. With that, I'll turn the call over to Pat. Patrick J. Sullivan - Insulet Corp.: Thank you, Deb. Good afternoon, everyone, and thank you for joining us on the call today. I'll begin with comments on the exciting news we released to the market on July 20, to directly distribute the Omnipod in Europe. And then, I'll provide a brief review of our second quarter performance and share our recent business highlights. Mike will then provide more detail on our second quarter financial results, our guidance for Q3 and full year 2017. Shacey will follow up on our commercial and R&D progress and then we'll open the call for questions. July 20 was a day of significant transformation in Insulet's history. On that day, we announced our decision to directly sell the Omnipod System in Europe. This move will significantly accelerate our revenue growth and further improve our gross margin profile, when this transition is complete. And when combined with other steps we're taking, our gross margin will expand from 50% in 2015 to nearly 70% in 2021, a remarkable 2,000 basis point improvement. We are absolutely positively thrilled to go direct in Europe. This move will allow us to be close to our customers, have control over our existing and future markets, significantly improve our gross margins, and increase value for our shareholders. To be clear, this was a well-considered and extensively evaluated decision. Since the day I arrived at Insulet nearly three years ago, we have analyzed and exhausted a number of opportunities to best serve our European customers and capitalize on the significant international opportunities. Our exclusive distributor has done a fine job establishing a large, growing and incredibly loyal Omnipod customer base in Europe. Our decision came down to control, execution, margin expansion, and shareholder value creation. There is absolutely no question that this is the right decision and the right time to go direct in Europe. As Shacey will explain in more detail, we have spent the last two years evaluating and preparing for this opportunity. And while there may be some short-term disruptions, there is no scenario that results in anything less than significant financial growth and value creation for Insulet and our shareholders. We already have a highly talented team on the ground in Europe, executing a detailed transition plan We are absolutely confident that we will successfully transition the business and continue to profitability grow and expanding international markets. I'll now provide some details on our impressive second quarter results. I'm once again pleased with Insulet's strong performance. And, as a result of this performance and our outlook for the future, we're raising full year revenue guidance to $440 million to $450 million, a raise of $13 million between the midpoint of the previous and this new guidance. We finished Q2 2017 with revenue of $110 million, a year over revenue growth of 26% and $4 million above the midpoint of our guidance range. Our Q2 gross margin continued to improve. And a result of our plans to go direct internationally, when combined with the operational improvements we continue to make, we now have a clear line-of-sight to gross margin approaching 70% in 2021, a 500 basis point improvement from our previous target of 65%. In Q2, every area of our business delivered outstanding performance. U.S. Omnipod revenue was over $65 million, delivering a strong growth of 16% year-over-year. International Omnipod revenue was almost $27 million, a significant growth of 60% versus the prior year, the result of continued very strong adoption in France. We achieved strong growth in our installed base in both the U.S. and internationally during the quarter and are increasing our year-over-year worldwide installed base growth expectation to 25%, up from 20%. Our Drug Delivery revenue was $18 million, in line with our expectations, and representing solid growth of 23% over the prior year. We continue to make significant progress in our manufacturing and supply chain initiatives, resulting in continued improvement in gross margin and improved quality of our products. Our manufacturing processes and ongoing improvement efforts continue to reduce scrap, increase productivity, improve line efficiency, and drive sustainable cost savings. During the second quarter, we shifted more of our freight shipments from air to ocean and will continue to increase this rate during the balance of this year. And as discussed previously, we expect our move from air to ocean will improve our gross margin on an annual basis by approximately 100 basis points and for 2017 will be at approximately 50 basis points. We're also pleased with the progress we're making on the build out of our new state-of-the-art manufacturing facility in Massachusetts, where we will install two highly automated lines with our first schedule to come online in 2019. We're making significant progress on the development of our Omnipod Dash product. We performed market research on Dash at the ADA tradeshow in June and received terrific feedback from clinicians. I'm very proud of the extraordinary efforts of our cross-functional teams to ensure we will have a high quality product that exceeds our customers' expectations. The Dash is a technology platform for all of our future innovations, the U200, the U500 and the Horizon Automated Glucose Control System. These development efforts will allow Insulet to maintain its competitive edge with truly differentiated and the innovative products. In Drug Delivery, Amgen's Onpro kit reached 55 conversions at the end of the second quarter and I'm sure all of you have seen in the last direct-to-consumer advertising campaign on television. We continue to work with pharmaceutical companies for the delivery of drugs using our Omnipod technology. We have a unique value proposition in Drug Delivery and we remain excited about the long-term potential and value creation opportunity this business provides. I'm very proud of the performance of the company over the past three years. When you compare our revised 2017 revenue and gross margin guidance to the 2014 results, we have nearly doubled the top line and improved gross margin by 10 percentage points. Now we are well on our way to achieve our five-year target of $1 billion in revenue, gross margins approaching 70% and above market profitability. With that, I'll turn the call over to Mike. Michael? Michael L. Levitz - Insulet Corp.: Thank you, Pat. I will review our second quarter results and then discuss our third quarter and full year 2017 guidance. I will also give some color on the expected impact of our recently announced assumption of direct distribution in Europe in mid-2018. As I review our results, unless otherwise stated, all commentary regarding changes will be on a year-over-year basis. We are very pleased to report second quarter revenue growth of 26%, with revenue of $109.8 million compared to $87.3 million. All three of our product lines contributed meaningfully to this growth. We exceeded the midpoint of our stated guidance by $4 million with half of the beat coming from U.S. Omnipod and the remainder split between international Omnipod and Drug Delivery due to strong demand across our business. Our gross margin increased by over 100 basis points to 58.9%, primarily from improvements we have made over the last year to our manufacturing and supply chain operations, as well as improvements to product quality, offset in part by unfavorable mix due to higher international distributor sales. Our operating expenses increased to $68 million compared to $51.7 million and were consistent year-over-year as a percentage of revenues. The increase in spending reflects head count that we've added over the last year to support the growth in our business, including increased investment in development and clinical work on our exciting innovation projects, as well as the expansion of our commercial and operational infrastructure, consistent with our stated plans and objectives. We ended the quarter with over $258 million in cash and investments compared to approximately $300 million at the end of last year. The decrease is a result of our capital expenditures, primarily associated with investments in our U.S. manufacturing project, which continues on plan. Our cash and investments also reflect continued strong days sales outstanding as well as stable inventory levels, even with the significant growth of our business. We are very pleased with our strong financial position, as we continue to make strategic investments in support of our near and longer-term organic growth opportunities. I will now update you on our 2017 outlook. For the full year, given our better than expected revenue to-date and the strong momentum across all of our business lines, we are raising for revenue outlook to be in the range of $440 million to $450 million compared to our previous range of $425 million to $440 million. The $12.5 million raise at the midpoint is largely associated with stronger Omnipod demand in both the United States and international markets. The revised guidance compares to 2016 revenue of $367 million and represents growth of 21% at the midpoint. First, we now expect full year U.S. Omnipod revenue in the range of $263 million to $268 million, representing growth of 16% at the midpoint. Second, we expect international Omnipod in the range of $105 million to $108 million, now representing growth of 48% at the midpoint. And third, we expect Drug Delivery in the range of $72 million to $74 million, representing growth of 12% at the midpoint. For the third quarter of 2017, we expect revenue in the range of $112 million to $116 million compared to $94.8 million, representing growth of 20% at the midpoint. This will be driven by continued strong growth across all of our business lines. First, we expect third quarter U.S. Omnipod revenue in the range of $67 million to $69 million, representing growth of 14% at the midpoint. As a reminder, our U.S. Omnipod growth this year is net of a 2 point unfavorable impact from the expiration of a historic royalty arrangement. Second, we expect international Omnipod in the range of $27 million to $28 million, representing growth of 44% at the midpoint. And third, we expect Drug Delivery in the range of $18 million to $19 million, representing growth of 15% at the midpoint. On gross margin, we are reaffirming our expectation that 2017 full year gross margin will approach 60%, up significantly compared to our reported 57.5% last year. This reflects the significant operational improvements we've made, partially offset by the unfavorable mix of international distributor revenue. We are extremely pleased with the tremendous progress to-date in margin expansion. To achieve our goals, we will continue to invest in our business to drive long-term growth and profitability, including commercial, research and development, and infrastructure investments. We now expect full year 2017 operating expenses to increase between 25% to 30% from 2016, up from our previous range of 20% to 25%, but lower as a percentage of revenue, reflecting initial cost to expand our European infrastructure as well as higher performance-based incentive expenses. Consistent with our previously stated guidance, we expect full year 2017 EBIT to be roughly in line with last year. Given the plan in mid-2018 to assume direct commercial responsibility over our European Omnipod business, we'd now like to give you some color on how we expect this change to impact our 2018 results compared to historical trends. From a revenue standpoint, while customer pricing in Europe is on average 20% lower than our pricing in the United States, the move to end-user pricing represents an increase of over 50% as compared to our existing distributor pricing. As such, beginning in the second half of 2018, when we no longer sell through our current distributor, we expect a material increase in our revenue run rate. Even with the expectation that our newly established European sales force will not reach full productivity for approximately one year and expecting that Omnipod's significant installed base growth in France will eventually moderate. We are extremely excited about the opportunity to drive continued strong revenue growth outside the United States with the direct sales force focused on Omnipod and with innovation targeted for our global markets. From a gross margin standpoint, given the increased revenues once we transition to a direct model in Europe, we expect our total company gross margin to increase by approximately 400 basis points on a full year basis, with half of that expected for calendar year 2018, assuming a mid-year transition. As a result, as Pat mentioned, we are now raising our long-term total company gross margin targets from 65% to approaching 70%. From an operating expense standpoint, we expect the change to a direct model will result in incremental annual run rate operating expenses of approximately $45 million to $50 million. In addition, we expect non-recurring expenses associated with the transition to include approximately $10 million of start-up costs, as well as a fee payable to our current distributor. That fee is determined based on the number of Omnipods we sell in the 12 months following the June 30, 2018 contract expiration to customers who had previously purchased their Omnipods from our distributor. Assuming the continued growth of Omnipod in Europe through mid-2018, and limited attrition in the 12 months thereafter, we estimate this fee could total approximately $50 million. Excluding these anticipated non-recurring expenses, we expect the assumption of direct commercial operations in Europe will be accretive to total company earnings and we continue to expect to be EBIT positive in 2018. We also remain confident about reaching our longer-term targets of $1 billion in revenue in 2021 with gross margins now expected to approach 70% and above market profitability. This is a very exciting time for Insulet as we drive significant revenue growth, make the pivot to profitability and deliver differentiated innovation to our customers worldwide. I will now turn the call over to Shacey. Shacey Petrovic - Insulet Corp.: Thanks, Mike. We have completed the first half of 2017 with strong results and we're headed into the second half with incredible momentum. Second quarter results were once again terrific. Our commercial strategies continue to drive robust revenue growth and a sizable increase in our installed base. We also made substantial progress on innovation and operational initiatives, particularly with our Omnipod Dash and Horizon programs. As a result of the tremendous growth we're experiencing internationally, we are increasing our full year 2017 expectation to approximately 25% year-over-year growth in our global Omnipod installed base. We're reaffirming the expected growth of 15% in our U.S. installed base. And we're raising our estimate of the international installed base growth to over 40% from our prior assumption of 30%. As a reminder, because of Omnipod's recurring revenue model, installed base growth is the best predictor of revenue growth. In Q2, our U.S. installed base grew approximately 15% year-over-year, as we expected, and our international installed base grew more than 70%, exceeding our expectation. Combined, this represents year-over-year growth in our global installed base of approximately 35% as of the end of the second quarter, which drove our strong company revenue growth. Our U.S. revenue growth was fueled by the investments we have made to increase field sales footprint, raise product awareness, and broaden market access. These efforts are driving improved account penetration and are attracting more potential new users to Omnipod. Our pipeline is the strongest it has been in company history. We're clearly increasing awareness among our targeted segment, multiple daily injection users. Direct-to-consumer digital advertising is helping to educate MDI users on how Omnipod can give them better control, freedom and quality of life compared to other insulin delivery methods. And our field team is driving increased advocacy and utilization among physicians. On top of attracting new customers, we continue to focus on improved market access and reimbursement, because this impacts customer experience and retention. Our team has been capitalizing on Omnipod's distinct product advantages and low upfront cost to expand Medicaid access for Omnipod. In Q2, we added access to 2 million covered lives, primarily for Medicaid beneficiaries, bringing our total U.S. Omnipod access to 180 million lives, or approximately 58% of all covered lives in the United States. Also, this quarter, we were thrilled to welcome Bret Christensen, as our new Chief Commercial Officer. Bret brings decades of commercial leadership and success to Insulet. And he has hit the ground running, as expected. In particular, his experience and expertise in consumer marketing, sales force optimization, and wining in highly competitive markets is already driving value for the organization. Bret leads all commercial operations and teams for the United States and Canada. While commercial execution, an improved customer experience, and increased market access drive growth in the near-term, our innovative product development pipeline will fuel growth in 2018 and beyond. This quarter we made great headway on our innovation roadmap, particularly, with Omnipod Dash, which we unveiled at ADA for market research. As a reminder, Omnipod Dash includes our Bluetooth connected Android-based Personal Diabetes Manager. Dash will provide users with improved simplicity and ease-of-use through a modern touch-screen device wirelessly connected to our Bluetooth-enabled pod. Dash is the platform for our future innovation, including concentrated insulin and our Horizon Automated Glucose Control System. By moving to this Bluetooth platform, we are able to liberate the data in our PDM and pod to provide mobile dashboard displays for Podders, mobile apps for caregivers and data and insights for patients, physicians and payers. This platform also allows us to integrate with Bluetooth-enabled sensors, including Dexcom's G5 and G6 which are incorporated into our Omnipod Horizon programs. Our introduction of Dash at ADA was a huge success. While more than 100 end-users have already been involved in the development of Dash, we took the opportunity to collect additional market research from ADA attendees that focused on preferred product features and the Dash user interface. This feedback was overwhelmingly positive. 94% of participants indicated that Dash was a significant improvement over the current Omnipod system. 90% agreed that Dash was the right platform for future Omnipod innovation. And 80% said that Dash would be even easier to train on than the current Omnipod System and will allow more healthcare providers to treat more patients with pod therapy. It's terrific to see clinician feedback on Dash mirror the enthusiasm expressed by our Podders who have tested this platform as part of our research and development process. We are on track with Dash development and expect to submit to the FDA in Q4. In addition to the exciting Dash feedback at ADA, we also highlighted the progress that we've made on Omnipod Horizon Automated Glucose Control System, including its impressive clinical performance. We conducted a Product Theater to share relevant data, progress on development and to complete market research on the Omnipod Horizon user interface. This event was standing room only and attracted over 400 attendees. Based on the participant feedback we collected, the diabetes clinical community is eagerly anticipating the introduction of Horizon. We are making rapid strides towards commercial launch and recently started our third IDE study for Horizon, which is enrolling 48 patients across three centers and is expected to be fully completed by October. Patients in this IDE trial are spending a longer time in our hybrid closed-loop phase and it is taking place in a hotel setting instead of a clinical research center. Our concentrated insulin development program with Eli Lilly to use U500 and U200 insulin out of Omnipod remain on track. As a reminder, concentrated insulins enable us to better serve people with higher daily insulin requirements, including people living with insulin-dependent type 2 diabetes. These products, which will enter the market in 2019 and 2020, will more than double our addressable market and have the potential to be significant growth catalysts for Omnipod. Results of our Drug Delivery business remain strong, supported by the market's continued adoption of Amgen's Neulasta Onpro kit. As Amgen mentioned on their last earnings call, its Neulasta Onpro kit now accounts for approximately 55% of all U.S. Neulasta doses. This remarkable growth in adoption is a testament to the value of the pod for delivering medicines other than insulin. And we continue to make good progress on the clinical development programs underway with other pharmaceutical partners. We believe Drug Delivery represents a tremendous opportunity for longer-term growth. Last, but certainly not least, we are thrilled to assume the distribution and commercial support for our Omnipod users in Europe in July of 2018. Early on in his tenure, Pat recognized our international Omnipod opportunity and business model as having potential to drive significant additional value for Insulet. Pat and I each have built and run European businesses and our executive team has substantial international experience, building and growing businesses across all major global markets. Our team understands and appreciates Europe's uniqueness and its considerable prospects. For the better part of two years, we've been evaluating and preparing for this potential move. We have now established an office and team in the United Kingdom, including human resources, regulatory, quality and commercial leadership. And we are leveraging our European Physician Advisory Board, third-party and internal market expertise and our rapidly-growing commercial partners to ensure we have a successful transition of the business. With the guidance of these subject matter experts, we have developed a deep understanding of the patient journey in the various markets across Europe. We're using these insights to formalize our key processes and operations at the country and Pan-European levels. Our immediate focus is on providing continuity of care for our existing customer base. And then, we will drive further penetration and expansion into our considerable international market opportunity. Today, Omnipod is sold in 13 European countries with the vast majority of the use occurring in four markets: France, the Netherlands, Germany, and the United Kingdom. For one-time clarity sake and to help you with your modeling, our European distributors' best estimate is that there are approximately 50,000 Omnipod users in Europe. Our largest and fastest-growing European market is France, which represents almost one-third of our European business and is highly concentrated, where distribution, training, and customer support are managed by home healthcare providers or (27:42). This reduces the business transition risk for us since no manufacturer sells or markets directly to the patient. Instead, patients in France choose the technology they prefer and they are overwhelmingly choosing Omnipod. Additional risk mitigation is expected as a result of the existing contractual obligations and incentives for our distribution partner to continue to grow the Omnipod user base over the next year and transition the business to us. We appreciate the execution challenge we have before us to move to direct control of our European business. We have accelerated the work and investments already underway to ensure we are fully prepared to assume complete control of the Omnipod franchise as of July 1 next year. We are confident in our team's ability to secure and optimize our European business in the near-term and to deliver exciting international market expansion over the longer-term. In Europe, based on the difference between our distributor pricing and average customer pricing, this change in business model is quickly accretive, delivers operating leverage, expands gross margins, and allows us to control our international business, which we see as a strategic imperative. This is an extraordinarily exciting opportunity to drive value for Insulet, for our shareholders and, most importantly, for our growing global diabetes community. In closing, I am incredibly proud of the Insulet team. Our team has diligently identified, developed, and implemented plans to improve our key performance indicators and build our long-term growth prospects. It is incredibly rewarding to see these plans take shape and make such an impact in the marketplace. We are passionately committed to driving incredible results today and preparing for further accelerated growth tomorrow. Now, I'll turn the call back to Pat. Patrick J. Sullivan - Insulet Corp.: Shacey, thank you very much. Operator, let's open the call up for questions.

And our first question comes from Margaret Kaczor from William Blair. Your line is now open. Margaret M. Kaczor - William Blair & Co. LLC: Good afternoon, everyone. Thanks for taking the questions. I appreciate the extra color at the front-end here. That was helpful. In terms of as we look at maybe the next couple years for the European markets, can you give us any more detail in terms of France, how important is France towards growth and maybe as a percent of the installed base? Shacey Petrovic - Insulet Corp.: Sure. Margaret, this is Shacey. France is approximately a third of our installed base. And it is an important example of really the risk mitigation in this transition of the business because, as I mentioned, the (31:06) stands between the manufacturer and the patients. And so, it's a fairly straightforward market to transition. It's been an incredible growth driver. I mean, really, France has been a phenom. And we do expect that growth to moderate in the near to medium-term. But it's been a pretty spectacular performer for us over the last quarter. And the businesses – the different markets across Europe sort of span the spectrum from the French model where there is a middleman like the (31:40) to more a U.S. type of models like the UK. But we do expect that market to continue to grow, but we are kind of penetrating at large percentages now and so the growth will moderate. Michael L. Levitz - Insulet Corp.: This is Mike. I would just add that we have – as we've seen in the United States strong growth, we've seen very strong growth across the European markets and where we're direct in Canada. And so there is just a tremendous amount of adoption. So it's not a story all about France. I think the point about France is just it's a wonderful part of the story. And, again, it's a fairly easier operating model to transition to. Margaret M. Kaczor - William Blair & Co. LLC: Great. I appreciate that extra color. In terms of the follow-up, can you talk anything about the U.S. growth and maybe the launch plan for Dash, any kind of specific details you could share of when you think that's going out, maybe incremental detail of patient adoption, how you roll it out into the installed base? Thanks. Shacey Petrovic - Insulet Corp.: Sure. So, we had a great quarter – actually we had a great year so far in the U.S. Our pipeline is incredibly strong and that's been driven by commercial execution and direct-to-consumer marketing through digital channels. And so that's really increasing awareness and then the pull-through because of market access and the field performance has been very strong as well. And I think it's evidence that this focus on multiple daily injections and the value proposition there is really strong. And so that distinction is what's helping to fuel Omnipod's growth. As it relates to Dash, the feedback we got at ADA is that the platform will be even simpler and should strengthen our value proposition and our differentiation in that patient population. So we'll remain focused on that same user group. In terms of the rollout, we're keeping that kind of under wraps for competitive reasons. But I will say that we're going to have attractive avenues to access the system for both our existing users and new users. And we're really excited about the early feedback. And so we're going to do whatever we can to make sure it's a successful rollout and that also we can ramp quickly and supply what we think is going to be pretty great demand out there. But, I guess I have tempered those remarks by reminding everybody that our business model is a recurring revenue business model. So, it's not like this drives a bolus of revenue that you see with the capital models that exist out there. Margaret M. Kaczor - William Blair & Co. LLC: Great. Thanks.

And our next question comes David Lewis from Morgan Stanley. Your line is now open. David Ryan Lewis - Morgan Stanley & Co. LLC: Good afternoon. A couple of questions on Ypsomed. The first is on margins, the second is just on near-term business momentum. So, as we assume margins, Pat or Mike, the new target of 70% makes perfect sense to us 400 basis points to 500 basis points of improvement. But how much of that – how much was going direct a factor in the initial 65% number? Basically what I am trying to get at is, is 70% the ceiling or whether there are underlying improvements still not reflected in that 70%? And then I had a quick follow-up. Michael L. Levitz - Insulet Corp.: This is Mike. So, when we had talked about 65% target, at that time, we were evaluating whether to go direct or not and so it factored in at the existing business model at that time, which was not going direct. And that's why in going direct and that adding about 400 basis points to our model, that's how we raised from the 65% target to the approaching 70% target. In our Investor Meeting in November, we laid out the key drivers of what gets us from where we are today of approaching 60% to the previous target of 65%. And a significant portion of that was associated with manufacturing and operation supply chain improvements, including the move to our highly automated U.S. manufacturing. There are also commercial opportunities that were factored in there as well. Now, with the higher targets, that's reflecting in full the opportunity that we now have with the direct business model in Europe. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. So to the extent that there is underlying manufacturing opportunities that got you to 65% or conservative, there could be upside of the 70% number, as 70% just reflects Ypsomed, nothing else? Michael L. Levitz - Insulet Corp.: The way I would answer that is we have consistently set targets, not that we would be satisfied with any of our targets, but the targets need to be credible. So we have direct line-of-sight, as Pat said in the past and I have, to these targets. Is there upside to the target? There is always upside. We would say that our targets though are realistic. In that, look, there is downside risk too. So, we will not stop in driving the value of this business and we're very pleased with the progress we've made today. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then – thanks, Mike. And then, Pat or Shacey, Ypsomed is obviously a best case outcome and I appreciate your comments on how you'll manage disruption near-term. If you think about the back half of 2017, the ex-U.S. guidance sort of embeds some slower momentum. Do you think that captures the risk here and how should we think about – if there is going to be disruption, how we should weigh sort of first half 2018 versus second half 2017? Thanks so much. Shacey Petrovic - Insulet Corp.: Sure. Yeah. David, I think, our guidance is appropriately conservative given the transition negotiations and the pending change. So I do think it factors in that risk, but there is a clear line-of-sight to the upper end of the guidance because our interest with our distributor are somewhat aligned. So they make profit on pods. They are contractually obligated to continue to grow Omnipod between now and the expiration of the agreement. As Mike mentioned, they have a per pod fee following the 12 months after expiration of the agreement. And then they also have reputational risk if they don't continue to support Omnipod in the market. So, all of those things we believe help us mitigate risk. And I think the thing to remember is this really is short-term noise. This is a great move for us. It unlocks our international business opportunities both in Europe and beyond over the medium and long-term and just drives incredible value for us. So, yes, the guidance factors in that risk and I think we're ready to execute and pull that business over in 2018. David Ryan Lewis - Morgan Stanley & Co. LLC: Great. Thanks so much.

And our next question comes from Danielle Antalffy from Leerink Partners. Your line is now open. Danielle J. Antalffy - Leerink Partners LLC: Hey, guys. Thanks so much for taking the question. Congrats on a really great quarter. Patrick J. Sullivan - Insulet Corp.: Thanks, Danielle. Shacey Petrovic - Insulet Corp.: Thank you. Danielle J. Antalffy - Leerink Partners LLC: So, just a quick question on the U.S. Omnipod numbers in Q2. Shacey, you mentioned that the installed base in the U.S. was up 15%, as expected, but U.S. revenue beat by nearly $1 million at the top end of the guidance range. So, just wondering if you could talk about what's driving that outperformance there, if the installed base is growing as you'd expect. Is that utilization or pricing? What's going on there? Shacey Petrovic - Insulet Corp.: Yeah. It's just channel mix distributor versus direct. Danielle J. Antalffy - Leerink Partners LLC: Okay. Got it. And then my next question is on – well, I guess, following up on that is whatever that mix is, is that sustainable or is it just pretty volatile quarter-to-quarter? Shacey Petrovic - Insulet Corp.: I think it's puts and takes. Some of it is sustainable and some of it will just naturally fluctuate quarter-to-quarter. Danielle J. Antalffy - Leerink Partners LLC: Okay. Understood. And then my next question was, at ADA, there was a lot of excitement, at least I thought, around well, of course, Dash, but also pumps for type 2 patients. And I was wondering if you could give an update on when – timing for your type 2 products and how we should think about the ramp when those products do come to market. And does the business change at all your go-to-market strategy for type 2 patients? Is it going to be significantly different than for type 1 patients? Thanks so much. Shacey Petrovic - Insulet Corp.: Yeah. Thanks, Danielle. That's a great question. For our type 2 product, the limitation in serving the type 2 market is really about the reservoir size. If we want to keep the form factor that everybody loves with Omnipod, we have to figure out a way to serve people who need higher volumes of insulin on a daily basis for type 2 patients, who typically require anywhere from two times to five times more insulin on a daily basis than a type 1 patient. And so we do that with the concentrated insulins program. As I mentioned, the timing for those – U500 will hit the market in 2019 and U200 will hit the market in 2020. U500 is for very highly insulin-resistant patients and so a smaller niche, although we will be the only pump approved for U500. And so it's very likely we'll take a big portion of that population. And then U200 is really the molecule that unlocks the type 2 market for us. And when we think about the type 2 market, we think about insulin-dependent type 2s. And so if you take that volume, that's approximately two times to three times the size of the market – sorry, of our market today – sorry, it doubles or potentially triples the market that we have today with type 1. So we would see acceleration there, but our data demonstrates that most people who use or who are insulin-dependent type 2s are seen by an endocrinologist. So it doesn't really mean that we have to expand our channel, but we will have messaging. We will have a product that is uniquely developed for a patient with type 2 diabetes versus the type 1. Danielle J. Antalffy - Leerink Partners LLC: Thanks so much.

And our next question comes from Mike Weinstein from JPMorgan. Your line is now open. Michael Weinstein - JPMorgan Securities LLC: Thank you and congratulations as well on the quarter, obviously amazing performance. And let me – I want to circle back on Ypsomed and thanks for all the different commentaries. It was helpful. I do want to understand kind of beyond the fact that they're going to get paid on the next 12 month revenues post the transition, kind of, what is the obligation for them to continue to add new patients? I think their commentary on their own call suggested that the incremental adds from here will be relatively limited. Patrick J. Sullivan - Insulet Corp.: Mike, I think, the answer is that the contract doesn't expire until June 30 of 2018. And both parties are contractually bound with certain obligations. And one of their obligations is to actively promote the Omnipod System throughout Europe. And so I think with that – plus the fact that they have a financial incentive because they get profit on every Omnipod that they sell between now and then as well as this termination fee that's provided for and the reputational risk. I have full faith that they will live up to the obligations of the agreement. Michael Weinstein - JPMorgan Securities LLC: And so that doesn't include – that does include the continued investment in adding new patients to the installed base? Patrick J. Sullivan - Insulet Corp.: Correct. Michael Weinstein - JPMorgan Securities LLC: Okay. And then I just want to go back to some of the math that you shared. If I took the commentary about European pricing being on average over (43:43) 20% discount to the U.S. and then your commentary about the implied 50% plus increase in realized pricing in going from distributor to direct, the math works out to a realized price today to Ypsomed of just under $15. Is that correct and if so does that imply a gross margin on that business of about 30% today? Michael L. Levitz - Insulet Corp.: Hi, Mike. It's Mike. In answer to your question, so we have not had a practice of confirming pricing specifically, but we did give more color here specifically, so that you could get comfortable with the modeling. So, I think, it's fair to say that it is still a discount off U.S. pricing, but it's a sizable increase off of our current pricing to Ypsomed. In terms of the gross margin improvement, I think, the important way to think through that is just what we said. In that, it improves total company gross margin by 400 basis points on a full year basis, half that for 2018 as you would expect since the agreement ends mid-year. Michael Weinstein - JPMorgan Securities LLC: Okay. One last one to clarify, Mike. I think you said $45 million to $50 million incremental OpEx. Do you expect to – when do you expect that to layer into the P&L? Michael L. Levitz - Insulet Corp.: So I did want to give – since this is a change in business model, I did want to give a view of a run rate – an annual run rate for the European business. And I did say $45 million to $50 million. That's correct. It is important to note that we are standing up this business. We've been doing a tremendous amount of work over the last couple years to prepare for this. And there is spending in 2017 associated with standing it up, but there will also be, we expect, approximately $10 million of standup cost that are non-recurring. And then there is also this fee to Ypsomed to essentially buy the book of business that's paid based on the number of customers that transition to our product. The $45 million to $50 million was really once we're running the business direct, what does the run rate look like, because it is a change from our historic business model. In terms of how it ramps up next year, we'll give more clarity as we always do when we give 2018 guidance in February as part of our year-end results. But I think it's fair to expect that the cost will ramp up through the year because we're growing the business and establishing that infrastructure over time. [Technical Difficulty] (46:28) highly confident of the seamless transition mid-year. Michael Weinstein - JPMorgan Securities LLC: So what is that $45 million to $50 million number, just to understand what you're saying? Michael L. Levitz - Insulet Corp.: That's the run rate operating expenses of go direct business in Europe. Michael Weinstein - JPMorgan Securities LLC: We expect to be come second half of... Michael L. Levitz - Insulet Corp.: I'm sorry, Mike. Could you repeat that? Patrick J. Sullivan - Insulet Corp.: Okay. Mike, we lost you. Let's go to the...

And our next question comes from Tao Levy from Wedbush. Your line is now open. Tao L. Levy - Wedbush Securities, Inc.: Great. Thanks. Good afternoon. Just maybe one clarification and I'll have two questions. Is my math correct that we're talking about the current run rate business from the end user side of things for Ypsomed being around $140-ish million plus whatever the PDMs sell for over there? Is that in the ballpark? Michael L. Levitz - Insulet Corp.: Tao, this is Mike. I just want to make sure I'm understanding your question correctly because we gave guidance for the year for our international... Tao L. Levy - Wedbush Securities, Inc.: I'm sorry, when you take over the account. Michael L. Levitz - Insulet Corp.: Oh, I'm sorry. Tao L. Levy - Wedbush Securities, Inc.: Yeah, truing up, what would that book of business look like under... Michael L. Levitz - Insulet Corp.: Yeah. Well, I think, what we've been saying is that the business is growing very nicely from a volume standpoint. From a pricing standpoint, we expect the pricing to improve mid-year by approximately 50% from our historic pricing. And so with our guidance that we've already provided of $105 million to $108 million for international, obviously, not all of that is Europe. It's roughly 80% or so. But that's the basis for doing estimates of 2018 run rate. And, again, we'll give more clarity specifically on 2018 when we do our year-end call. Tao L. Levy - Wedbush Securities, Inc.: Okay. And just also to be clear, following up on what Mike had asked. My German is not great, but I thought the Ypsomed had said they were going to end the next year at around 65,000 installed base and kind of grow it at that 30%. Is that correct or did they say that it wasn't going to grow? Shacey Petrovic - Insulet Corp.: They did indicate on their call that their business would continue to grow. The number that I provided, Tao, was the approximate patients that exist today. So, that's 50,000. And I don't recall the exact number, but I think it was north of 60,000 that they indicated on their call. And my German isn't great. Tao L. Levy - Wedbush Securities, Inc.: Okay. Thanks.

And our next question comes from Jeff Johnson from Robert Baird. Your line is now open. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good afternoon, guys. Mike, maybe just following up, I think, what an earlier caller, Mike, was getting at on the SG&A, the $45 million to $50 million. I just want to understand your comments there. Is that $45 million to $50 million incremental to the cost you're putting in right now into that business to try to make the transition smooth in the international market? Michael L. Levitz - Insulet Corp.: Let me be crystal clear. So, as a direct business in Europe, we expect the annual run rate operating expenses to support that on a direct basis to be $45 million to $50 million. That is the annual run rate when we are direct in Europe. Up until that time, we are ramping up the team. We have a clear plan, cross-functionally. And so, the cost will be ramping up to that, but that will be the run rate once we assume direct distribution on an annual basis mid-year. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Okay. So, we don't have to step up that full $45 million to $50 million come the transition period? Michael L. Levitz - Insulet Corp.: I think what's important to understand though is there will be stand up expenses in 2018, but we have to hire all the people. And the full run rate spending, once we are fully operational, is $45 million to $50 million. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Understood. And then on the inventory side, I would assume Ypsomed is holding at least one month or two months of inventory, maybe a little bit more. Will that net out against your first half revenues or in other words will they start drawing into their inventory base as we get into the last month or two months of their contract, that we need to account for that in our revenue estimates for you? Or will there just be some sort of return at the mid-year that we'd kind of one-off out of the model at that point? Michael L. Levitz - Insulet Corp.: Jeff, this is Mike. I would not presume that inventory has a meaningful impact on your models. We have been managing, as we've been saying for quite some time now, managing to make sure that there is not a lot of inventory in the channel. With all of the improvements that we have made in manufacturing and supply chain, there really is no need for it. And so, I would not expect that inventory will have a meaningful impact on your models. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Okay. That's helpful. And then if I could squeeze in a follow-up here. Just when I think of some of the Omnipod Horizon trials and progress you've made so far, starting the third IDE – Shacey, maybe this is a question for you. On the first two, you've already gone through pediatrics and adult exercise postprandial, some of those things. I've only covered the space for I don't know two years or three years at this point, but you've made a lot of progress in a short while here in six months or nine months. Is there something about Omnipod? Is it the simplicity of it, the safety of it? Is the FDA just getting more comfortable with some of these trials? But what has enabled you or the Horizon system to move so quickly through some of these different IDEs relative to maybe at least what I feel like some of your competitors have done over the last five years? Shacey Petrovic - Insulet Corp.: Well, I think, the primary thing is the team that is working on the development program. We have a world-class Medical Director in Trang Ly, who has been involved in every single APE clinical program prior to coming to Insulet. She knows what great looks like and she knows how to avoid some of the pitfalls that other programs ran into. We have an extraordinary research and development team, particularly the software and chip (53:05) team and mobile technology team in San Diego and the pod – I can't even single them out. They're working very, very well together, the device team, the software team to make rapid iteration and progress on the innovation front. And then you highlighted it. The FDA has been very supportive. I would describe our relationship with them as collaborative. We're getting the guidance that we need. And we feel like we've got a very tight clinical plan that we're executing on. So, I would agree I get so excited when I think about the progress the team has made in such a short period of time and even more excited when I think about the product that we're going to launch and the differentiation that we'll bring to market, so. Patrick J. Sullivan - Insulet Corp.: Go ahead, operator.

And our next question comes from Raj Denhoy from Jefferies. Your line is now open. Raj Denhoy - Jefferies LLC: Hi. Good afternoon. I wonder if I could ask a product development question. One of the things on Horizon that has kind of stood out as the fact that you're using a receiver on Android device that's kind of locked down, right, and there has been some talk about whether you could open that up and maybe have a connected device as the ultimate receiver and maybe the FDA is getting more willing to do that. Is there any updates on that front? Shacey Petrovic - Insulet Corp.: And by connected device, do you mean mobile phone? Raj Denhoy - Jefferies LLC: Exactly, right. So, it would add some cellular connectivity to it. Shacey Petrovic - Insulet Corp.: Yeah. So, we continue to be in great, I think, active discussions with the FDA regarding that. And that's certainly our hope, if that we could get to phone control maybe even before Horizon. I think the FDA recognizes and now has set up panels of experts to work on cybersecurity for mobile devices and moving to phone control for medical devices. And we're actively engaged in those discussions and those panels. And so we're working very hard on behalf of our customer base to get to that – to phone control because we know it's what they want and we'd like to be leaders in that area. Raj Denhoy - Jefferies LLC: Okay. That's helpful. And obviously it adds this question, but 670G, right. So there has been an automated insulin delivery device out there, a little bit limited in its launch, but clearly you're not seeing your numbers, but I am curious whether there is anything it offer in terms of feedback from marketplace or whether you think you're through kind of the worst of people's worry around that, if there's any update on that front would be helpful. Shacey Petrovic - Insulet Corp.: I think we've heard what you've heard. There have been some bumps in the launch. And we are hearing from endos that they are becoming more familiar with just how much time and work it's going to take to – and that they are going to need to devote to support and train people on these more complex systems. And I think that's just highlighting the difference in our value proposition around simplicity and ease of use. And I think it supports our messaging that there may be some reason to use a device like 670 on a patient, who is wearing a tube pump and is willing to put in the work to get whatever incremental benefit they are going to out of that technology. That's not our patient population. Our targeted demographic is the multiple daily injection user. And for those people, we can help bring them to pod therapy and better glycemic control, better quality of life that they would not have gotten because they weren't willing to get onto to a tube pump. So I think it just highlights really the segmentation in the market and that we're a different value proposition and a different patient target.

And our next question comes from Doug Schenkel from Cowen. Your line is now open. Ryan Blicker - Cowen & Co. LLC: Hi. This is Ryan in for Doug. Thanks for taking my questions. You noted the installed base growth of 15% in the U.S. year-over-year and that your pipeline is as strong as it's ever been. Based on my math, it seems U.S. new patient starts approximated mid-to-high teens year-over-year growth in Q2 and maybe even 20% plus. Am I in the right neighborhood? Shacey Petrovic - Insulet Corp.: We're purposely not giving that detail any longer because it's misleading in terms of its connection to revenue growth and that just goes back to our business model. But really the best predictor of revenue growth is installed base because you have to take into consideration that that's 90% plus of what drives our revenue in a quarter and attrition also drives or retention rather also drives revenue. And so, I would just focus on the fact that we grew our installed base 15% in the United States the last quarter. Michael L. Levitz - Insulet Corp.: What I would – this is Mike. I would just say. I mean we have seen increasing momentum quarter-by-quarter and are very pleased with the growth in new patients. Shacey Petrovic - Insulet Corp.: Thanks, Mike. Ryan Blicker - Cowen & Co. LLC: Understood. And then maybe just one follow-up on Drug Delivery. I believe at your Investor Day last November, you talked about Amgen wanting to launch the Onpro kit internationally. We haven't heard much about that since then. Can you – anything you can provide there? Is it something that's possible for 2018? Patrick J. Sullivan - Insulet Corp.: That's really a question for Amgen. Operator?

And our next question comes from Jayson Bedford from Raymond James. Your line is now open. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon and congratulations on the performance. So, just a couple quickies and I apologize if I missed this. But on the payout to Ypsomed, the fee, is it paid on total European installed base at the time of the switchover? Is it just on the folks that they add over the next year? Michael L. Levitz - Insulet Corp.: Jayson, this is Mike. So the fee is calculated based upon the number of pods that are sold in the 12 months after the contract expires, which is June 30, 2018, to people who had previously purchased Omnipod devices from Ypsomed. So, it's based on the number of pods sold. So, as such, they have every incentive to continue to drive the number of patients on that device through June 30 of 2018 and that fee is maximized based upon there being very limited attrition of those patients in the 12 months following the contract expiration. So, from our perspective, we think it's a very helpful fee, because it aligns our interest in really making sure that the patients are taking care of, that we continue to grow Omnipod in Europe and that there is a successful transition of the business. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. That's very helpful. Just as a follow-up to – does going direct in Europe change your international revenue goals for 2021 that you laid out at the Analyst Day? Michael L. Levitz - Insulet Corp.: This is Mike again. So the goals that we laid out at the Analyst Day of $1 billion in revenue, driven by growth across all of our product lines with strong growth, 20% CAGR, across our product lines has not changed at all. As we said at the time, the focus is on growing the business. We don't need any one product or area to have outsized impact. It was never meant to be. Here is exactly the growth that we're going to have in U.S. versus international versus Drug Delivery which really meant to say we have so many opportunities across this book of business. That's why we're confident in the $1 billion target.

And our last question comes from Suraj Kalia from Northland Securities. Your line is now open. Suraj Kalia - Northland Securities, Inc.: Good afternoon, everyone. Congrats on a great quarter. So, Pat and Shacey, let me piggyback on some of the Ypsomed related questions. I know you all have provided a lot of information. We do appreciate it. Ypsomed has a pretty significant outreach effort and they have indicated 30% plus growth with their footprint. How do you all see the correlation – and forgive me if I missed this – between feet on the ground, the geographic disparity, the relative price elasticity? I know you all have given $40 million to $50 million incremental OpEx on a normalized basis or a steady state condition. I'm more curious if you can give us one additional layer of color. What does this mean in terms of how you all target geographies, people, so on and so forth? Shacey Petrovic - Insulet Corp.: Well, I will just remind you that the business is actually fairly concentrated. And so that's one factor when you think about what our investment and what the size of our team needs to look like. And then the other thing I'll say is that Ypsomed had a large portfolio of commodity devices in addition to Omnipod and so they weren't 100% focused on Omnipod and, obviously, recently launched their competitive device. So I think we're expecting once this team is fully – the sales team is fully productive that we will get benefit from the sole focus on Omnipod and our growing product portfolio. And that may mean that our team needs to look different. And then when you look across the continent and even among our four largest markets, their business models are very different. So, you may have a different type of commercial presence depending on the market that you're serving. I talked about France in my opening remarks. Our commercial organization in a country like France is going to look very different than our commercial organization, for example, in the United Kingdom or Germany. But we will make and we are – we plan to make – we are making the right level of investment to make sure that we best serve that marketplace and all of the important customers to us in Europe. Patrick J. Sullivan - Insulet Corp.: And just from another perspective. As Shacey mentioned, we're currently in 13 markets in Europe, concentrated in four. If you take an individual country in Europe, it's about the size of our Canadian operation. Shacey Petrovic - Insulet Corp.: That's correct. Patrick J. Sullivan - Insulet Corp.: So, it's a series of countries that are about the size of our business in Canada. So, we have every confidence we're going to be able to do this very effectively during the transition period. Suraj Kalia - Northland Securities, Inc.: Fair enough. And last question from my side, Pat or Shacey again. Can you give us some color on the differences or the relative utilization rates between U.S. patients and European patients? Here's the reason why I ask. We can do the math from the number of patients. We can reverse engineer the ASPs, what potentially you guys are going to charge. And, obviously, the key element here is knowing how many pods per month per patient will be used. And what I am trying to really get at is even if we don't increase the number of patients, let's assume that happens after you all separate, if nothing even else happens, this is the step-up in revenues just based on this direct transition. So I am trying to get to the bottom of that. Any color on the utilization between these geographies would be great. Thank you for taking my questions. Patrick J. Sullivan - Insulet Corp.: In terms of utilization per patient, we're really not in a position to give you that information. I think you can run your models and come up with reasonable estimates. What I would say about the European market is that in terms of pump penetration, Europe is only about 20% penetrated in pumps versus 30% in the United States. And so, we think there is great opportunities to expand the market in Europe through a higher penetration. And, secondly the attrition rate is about 9% in the U.S. and it's only about 2% to 3% in Europe. So, once a patient gets on a product in Europe, they'll start the reimbursement for life, which is vastly different than the every 18 month people transition during – in the United States transition between insurance plans.

Thank you. And at this time, I would now like to turn the conference back to Patrick Sullivan. Patrick J. Sullivan - Insulet Corp.: Great. Thank you, operator. We are absolutely positively thrilled to establish a direct presence in Europe. We've done our homework and we're very prepared and we're ready for the challenge. We have the right team in place to drive significant performance and success. And we have the right tools in place to win and achieve our goal of $1 billion in revenue in 2021. I'd like to thank the Insulet employees for their hard work and dedication to ease the burden and improve the lives of people living with diabetes and other diseases. Thank you for joining us on the call today. We look forward to sharing our progress during the course of what is shaping up to be a very exciting 2017. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.