Good afternoon, ladies and gentlemen and welcome to the Insulet Corporation Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host to Deborah Gordon, Vice President, Investor Relations.

Thank you and good afternoon and thank you for joining us for Insulet’s fourth quarter and full year 2020 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer and Wayde McMillan, Executive Vice President and Chief Financial Officer. Both the replay of this call and the press release discussing our 2020 results and 2021 guidance will be available on the Investor Relations 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 maybe forward-looking and could materially differ from current expectations. Please refer to the cautionary statements in our SEC filings for a detailed explanation of the inherent limitations of such statements. We will also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA, adjusted operating income and constant currency revenue, which is revenue growth, excluding the effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance and we believe that they are helpful to investors, analysts and other interested parties as measures of our operating performance from period to period. Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year reported basis with the exception of revenue growth rates, which will be on a year-over-year constant currency basis. With that, I will turn the call over to Shacey.

Thanks, Deb. Good afternoon and thank you all for joining us. On today’s call, I will discuss our key accomplishments and our strategic priorities. Wayde will share our 2020 financial results and introduce our 2021 guidance. And then we will open the call for your questions. The fourth quarter marked a strong finish to another very successful year for Insulet. In the face of extraordinary challenges, we executed our strategy, delivered consistently strong growth and advanced our key imperatives. This past year, more than any other, clearly demonstrated the loyalty of our customers, the durability of our pay-as-you-go model and the strong value proposition of our differentiated technology. What we have accomplished in 2020 is a clear indicator of the resiliency and strength of our people and our culture. Together, we embraced a new reality, while staying committed to our core mission we not only supported each other, but also our customers and the communities we serve. One of Insulet’s greatest strengths is our mission-driven customer centric culture. This was particularly evident this past year as our team rose to the challenges and showed an incredible ability to learn, adapt and perform in an ambiguous and rapidly changing environment. We executed with an unwavering commitment to our customers and delivered another compelling year of growth. Our mission remains the same improve the lives of people with diabetes and every Insulet employee drives towards this goal with unmatched passion. In the face of COVID, we didn’t miss a beat and we consistently advanced our innovation, commercial and operational initiatives. We entered 2021 with strong momentum with our Omnipod 5 commercial launch on track and expanding clinical and innovation pipeline and a growing global addressable market. In 2020, we delivered over 20% annual revenue growth for the fifth consecutive year, a remarkable achievement, given upended working conditions and market challenges. In fact, we finished 2020 ahead of our beginning of the year pre-COVID expectations. We achieved record annual and quarterly revenue for both our U.S. and international Omnipod product lines. We also completed the year with a fourth quarter record number of global new customers, driven by U.S. new customer starts that were higher than any quarter in Insulet’s history. While we finished the year strong and overcame most of the pandemic’s challenges, it certainly impacted our global new customer additions during 2020. As we look to 2021, this will serve as a slight headwind to revenue growth. Nevertheless, our financial performance has been impressive and our overall outlook remains strong. Let’s turn to our strategic imperatives centered around expanding access and awareness, delivering consumer focused innovation, growing our global addressable market and driving operational excellence. I will start with access and awareness and what we are doing to deliver the best customer experience. Our primary goal is simple, breakdown existing access barriers for Omnipod. There are far too many people living with diabetes that don’t have access to or are unaware of Omnipod’s many benefits compared to other therapies. Outcomes are being limited because access traditionally has been too complicated and too costly. Omnipod offers a simple, discrete form factor and an easy-to-use product platform that is unmatched. We provide our customers broad, affordable access and a simpler customer experience while making it easier to prescribe for physicians. Our new customer starts, industry leading retention and customer loyalty are clear indicators of the value Omnipod delivers. We continue to attract approximately 80% of our new customers from multiple daily injections. And in the fourth quarter, between 35% and 40% of our new Omnipod customers were Type 2, up from Q3. Our current system, Omnipod DASH, not only marked our move to mobile technology and represents the platform for our next generations, it also is powering our success, attracting both MDI users and individuals with Type 1 and Type 2, as well as expanding pharmacy access. By the end of the fourth quarter, we had secured coverage for approximately 75% of U.S. covered lives for Omnipod DASH, up significantly from last quarter. Today, most of our new customers throughout the globe start on Omnipod DASH. While we remain focused on providing our customers easy access through our pay-as-you-go model and the U.S. pharmacy channel, we also continue to increase Omnipod awareness of the benefits we deliver to people living with diabetes. The diabetes market is dramatically underserved and increased Omnipod awareness is driving growth. Our recent direct-to-consumer advertising campaign has provided us with great insight. The reaction to our pilot and the early read of key leading indicators, have been positive. So we have decided to continue advertising to support our efforts. We look forward to updating you all on our progress throughout the year. Taking a step back, Omnipod adoption and retention have been incredibly strong despite not having a CGM integrated product in the marketplace. This year, that technological gap will not only be closed, it will be surpassed. We are thrilled to be on the verge of introducing our next evolution of consumer-focused innovation. We could not be more excited, and we know our customers and our future customers have been waiting for our transformative technology. Omnipod 5, our automated insulin delivery system in partnership with DexCom, is designed to deliver unmatched freedom for people living with diabetes and to greatly simplify insulin management and improve glucose control. We will be the first tubeless entirely wearable AID system with the algorithm on the pod. Other than a pod change every 3 days, there will be no need to disconnect or stop therapy. And the number one request from current and prospective customers is the ability to control the pod from a personal smartphone. Our system will be the first to provide full smartphone control. This means we can remove an entire component of the system, resulting in reduced burden and dramatically improved simplicity and ease of use. Our goal is to provide our customers much more and to ask them to do much less. Omnipod 5 will first launch with control from Android mobile phones and all customers will receive a backup personal diabetes manager with SIM technology. This ensures constant connectivity to data even when not near a Wi-Fi and this allows for real-time remote monitoring. With Omnipod 5, parents will always know how their children are doing on our system. We have heard from many about how much of a relief it is to have confidence in Omnipod 5 to control glucose and be able to periodically monitor their children in real-time. As a result, trial participants have told us that their families are finally sleeping and that they are better parents and spouses since starting on Omnipod 5. Omnipod 5 is disruptive technology that we believe will revolutionize the market and the lives of people living with insulin-dependent diabetes. We are on track for a limited commercial launch in the United States in the first half of this year with pharmacy access and our pay-as-you-go model. Unlike other therapies, Omnipod 5 customers will not have to pay upfront, nor will they have an upgrade fee or be locked into a 4-year contract. Anyone with coverage, even existing tube pump users can try Omnipod at any time for free with our 30 days of freedom trial. Omnipod 5 will be offered at price parity with Omnipod DASH in the U.S. while we know our Aid system commands a premium, our focus is on securing broad payer coverage and customer access. Like Omnipod DASH, the majority of Omnipod 5 customers will have a pharmacy monthly co-pay of under $50. Pricing Omnipod 5 at the same level as Omnipod DASH will drive affordable coverage, accelerated customer adoption and is consistent with our efforts to eliminate barriers and broaden access. We anticipate we will be in a limited launch period for the majority of this year. This gives us time to secure broad pharmacy coverage since Omnipod 5 will be available in only this channel. We are confident Omnipod 5 will be a game changer for people living with diabetes and believe the primary driver of a broader commercial rollout will be consumer access. We have invested ahead to build our manufacturing and supply chain operations and are more than prepared to meet market demand. As we gear up for our highly anticipated launch, we continue to build clinical evidence to support many applications of Omnipod 5 as we believe our technology can provide enormous value to broad groups of patients within multiple markets and settings. We, therefore, will continue to heavily invest clinically and have a robust road map, including our ongoing work to expand our indication to preschoolers, ages 2 to 6. We recently completed our preschool pivotal study, and we are compiling the data for submission to the FDA. The study had 80 young children on product, and we are delighted to share that 100% have completed the trial and 100% have elected to continue into an extension phase. This is a clear indication of the value that Omnipod 5 can deliver for these young children. And we continue to plan for an expanded indication by the end of this year. Also, enrollment for our Type 2 feasibility study continues. Upon that study’s completion, we plan to conduct additional studies with the goal to further expand Omnipod 5’s indications. Lastly, from a clinical perspective, we look forward to presenting our Omnipod 5 pivotal data at the Endo conference next month. If our pre pivotal data is any indication, it should demonstrate just how powerful Omnipod 5 is for improved outcomes and improved quality of life. We are incredibly excited about the upcoming launch of Omnipod 5 and a successful rollout remains our top priority. But we also continue to advance an innovation road map that extends well beyond our AID system. In fact, in 2020, we doubled the number of product development employees to support our robust road map, particularly in the areas of software development and data science. We are committed to investing in future innovations to deliver increased value to our customers for many years to come. We are working on innovation programs designed to drive unparalleled simplicity of our user interactions with our systems, improved outcomes through algorithm advancements, insights and value from our growing data sets and analytics and user choice of sensor and smartphone integrations. We are committed to integrating Omnipod 5 in our future generations with multiple CGM platforms, and are delighted to be partnering with DexCom and Abbott Libre in these efforts. Their CGM offerings are helping to drive increased Omnipod adoption in both the Type 1 and Type 2 segments. This is extremely beneficial as the global diabetes market remains critically underserved and far too many people remain uninformed about their treatment options. By working together, we expect to deliver a long line of innovative offerings that further improve the lives of millions of people around the globe. Now turning to global expansion, during the fourth quarter, we entered 5 new countries within Europe and the Middle East. Just this week, we expanded into Turkey and plan to launch in Australia later on this year. In the countries we serve today, we estimate there are 11 million to 12 million people living with insulin-dependent diabetes. We are in a strong position to capitalize on this large addressable market, given our focus to provide simple and widespread access to Omnipod. A technology we know greatly simplifies lives and provides better outcomes and quality of life. We are expanding internationally in a targeted and strategic manner and are building our go-to-market plans to enter larger geographies over time. We expect our total addressable market will grow significantly as we continue to expand internationally, bring innovations like Omnipod 5 to market and further displace legacy therapies. We have made significant investments throughout our entire global business to support our robust innovation pipeline and global expansion. And in the face of COVID, the progress we made this past year in our manufacturing and supply chain operations was remarkable. We not only maintained a high-quality production, kept facilities open and met product demand levels. We also opened a new manufacturing facility in China and installed our third U.S. manufacturing line, further expanding our manufacturing and supply chain redundancy. In summary, we delivered another strong quarter, finished the year on a high note and entered 2021 with significant momentum across our business. Our competitive differentiators remain unparalleled. And the upcoming launch of Omnipod 5 will significantly strengthen our market position, and marks a major milestone in our mission to simplify and improve the lives of people with diabetes. I will now turn the call over to Wayde.

Thanks, Shacey. Our fourth quarter results completed another year of solid growth and execution. Although challenged with the pandemic through 2020, we entered 2021 with positive momentum. This past year, we meaningfully advanced our strategic imperatives. Our focus to invest for accelerated revenue growth and expand margins while strengthening our financial profile will continue to drive significant value for all of our stakeholders and further our mission. In the fourth quarter, we delivered over 15% revenue growth, $9 million above our guidance range. The key driver of this outperformance was total Omnipod growth of 18%, which was $8 million above our guidance range. Drug delivery also finished slightly ahead of expectations by $1 million. While the pandemic was less of a headwind than initially estimated, it negatively impacted global new customer starts throughout 2020, largely beginning in the second quarter. As a reminder, this dynamic created a compounding impact on revenue in the second half of 2020. Looking ahead, we expect the impact to revenue will continue in 2021, although to a lessening degree. In the fourth quarter, the impact on new customer starts was more favorable than estimated in both the U.S. and international regions, with a combined effect of approximately 10% off of our beginning-of-the-year expectations. We were encouraged to see continued sequential improvements as we added almost 40% more global new customers in Q4 than we did in Q3. U.S. Omnipod revenue grew 18% in the fourth quarter. Our solid top line performance was driven by our growing customer base, increased Omnipod DASH adoption and the continued mix benefit as we shift into the pharmacy channel. Omnipod DASH drove over 65% of our U.S. new customer starts, and we grew volume through the pharmacy channel to over 35% of our total U.S. volume. This represents a continued increase in adoption of Omnipod DASH in the pharmacy. Moving forward, shifting our business model to the pharmacy remains a key priority as it reduces barriers and drives expanded access for Omnipod is more efficient for our customers, provides low, more predictable out-of-pocket costs and is easier to prescribe for physicians. Not to mention the number of benefits for payers. International on Omnipod revenue also grew 18%, driven by a growing customer base and more favorable performance in Europe than expected. Despite COVID related shutdowns in many European countries. Global attrition and utilization were again stable in the quarter. Drug delivery revenue decreased 11% due to timing of production. Gross margin was 65.5% in the fourth quarter, representing a 150 basis point increase, in line with our expectations. Our gross margin expansion continues to be driven primarily by our improved U.S. manufacturing operations as we further ramp our new automated lines as well as the ongoing benefit of volume mix shift into the pharmacy channel. Foreign currency was a 70 basis point tailwind, partially offset by a 40 basis point headwind from COVID related safety and mitigation costs. Operating expenses in the fourth quarter were above our expectations due to a $15 million charge related to the resolution of a contingency payment we disclosed the positive resolution in late December, and we’re pleased to have reached favorable terms with our former European distributor and within our estimated range. Excluding this charge, operating expenses were in line with our expectations, including a stock award to all employees for their execution in a very challenging environment, as well as to mark our 20th anniversary as a company. As a result, we incurred a $7 million expense relating to a one-time equity bonus. This grant also serves as a way for our employees to be more invested in our company and our future, especially as we enter an exciting new phase with the launch of Omnipod 5 this charge was offset somewhat by lower R&D and selling and marketing expenses due to timing of projects, which we now expect will occur in 2021. The adjusted EBITDA margin was 14% in Q4, down from 17% in the prior year. We continue to invest throughout our business, including increases in advertising and brand awareness, innovation as well as scaling our global business to support our growth. For the full year, we delivered total Omnipod revenue growth of 23% and total company revenue growth of 22%, achieving another record year and further illustrating the strength and durability of our annuity revenue model. In 2020, we achieved gross margin of 64.4%, down 70 basis points and in line with our expectations. This included a 90 basis point unfavorable impact from COVID related costs and a favorable foreign currency impact of 20 basis points. Excluding COVID related costs, our gross margin finished on target with the original guidance we set at the start of the year. We are clearly seeing the benefit from our increased capacity and strengthen global manufacturing capabilities as we scale to meet growing global demand for Omnipod. We are also seeing the mix benefit from Omnipod DASH sold through the U.S. pharmacy channel. For the full year, we achieved adjusted EBITDA margin of 16%, up from 15%, exceeding our guide due to timing of spend. Turning to cash and liquidity, we remain in a strong position with our earliest debt maturing in 2024 and low cash interest expense. We ended 2020 with $962 million in cash and investments. Our sound financial position gives us flexibility to continue to invest in support of our long-term growth strategy. Now, turning to our outlook for 2021, our foundation for long-term, sustainable growth and value creation is clear. Although we will still be dealing with the global pandemic’s effect on new customer starts from 2020 and into 2021. For the full year, we expect total Omnipod revenue growth of 17% to 21%, and total company revenue growth of 15% to 20%. By product line, we expect U.S. Omnipod revenue growth of 21% to 25%. This will be driven by volume growth of Omnipod DASH, aided by our increased investment in awareness, our differentiated pay-as-you-go model in the pharmacy with a mix benefit, expanded access and Omnipod adoption in the Type 1 and Type 2 markets. We will also benefit from the limited commercial launch of Omnipod 5 as we begin to ramp in the second half of the year. We expect full year 2021 International Omnipod revenue growth in the range of 10% to 15%, driven by further growth in our current and new markets. This will be offset in part by the expected persistence of the global pandemic in Europe as well as the compounding impact of lower customer starts from 2020. While we are encouraged that new customer starts improved as we exited 2020, the recent impact of COVID has been felt more strongly in Europe than the U.S. Lastly, we expect drug delivery to be in the range of an 11% decrease to a 4% increase based on our partner’s current forecast. Looking now at gross margin, for full year 2021, we continue to expect to achieve our stated gross margin target of 67% to 70%. This expansion will be driven by global Omnipod volume growth, positive mix from the U.S. moving into the pharmacy and benefits from our enhanced manufacturing operations. Our teams continue to build efficiencies and scale into our manufacturing operations. We currently have two lines producing sellable product today and expect our third line to begin sellable production this year. In addition, our second contract manufacturer in China is an extension of our capabilities in that region, increasing our capacity and redundancy while balancing volume between the two sites. We are in a solid position to drive margin expansion this year. During 2021, we expect our operating expenses will largely rise in line with revenue growth, as we continue to invest and build upon our differentiated consumer-focused innovation and position in the large and underpenetrated Type 1 and Type 2 markets. One item to note is that as we mature as a company, and shift from developing Omnipod 5 to marketing and expanding access to the product. Certain clinical trial efforts will shift to support our commercial strategy. Other R&D activities will see a similar shift. As a result, we estimate approximately $15 million of costs will shift from R&D to SG&A in 2021. We expect 2021 operating margin to be in the low double digits range, up significantly from 5.7% in 2020. This balances our continued investment for growth with strengthening our financial profile. Finally, we expect capital expenditures to increase in 2021, primarily due to continued investments in manufacturing operations and expanded manufacturing capacity to support our fast-paced growth and the launch of Omnipod 5, as well as some carryover of expenditures from last year. Turning to first quarter 2021 guidance, we expect total company revenue growth of 20% to 24%. This includes total Omnipod revenue growth of 16% to 19%. By product line, we expect U.S. Omnipod revenue growth of 20% to 23% and international Omnipod revenue growth of 9% to 12%, reflecting the carryover headwind of lower global new customer starts in 2020 related to the pandemic as well as a continued impact on 2021, primarily internationally. We also expect drug delivery revenue of $18 million to $20 million. In conclusion, we are proud of how our team persevered in 2020. We delivered over 20% revenue growth, advanced our strategic imperatives and remain on track to launch Omnipod 5 in a few months. The unmet need in the diabetes market is extraordinary, and we expect Omnipod to further replace legacy therapies as we continue to grow our addressable market. Our priorities are clear. We expect the investments we are making and the capabilities we are building will drive sustainable, long-term growth and create long-term value for shareholders and allow us to deliver a strong pipeline of future innovations to the diabetes community. With that, we will turn the call over to the operator for Q&A.

Thank you, sir. [Operator Instructions] Our first question is from Larry Biegelsen from Wells Fargo. Please go ahead.

Good afternoon, guys and congratulations on nice end to the year here. So I guess, just one for me on the rollout of Omnipod 5. Shacey, what is a limited launch mean? Who is going to have access and who all have access and how is that going to evolve through the course of 2021? Thank you.

Sure. Thanks for the question, Larry. And I did want to share in Q&A that we are under review now and that’s part of what gives us great confidence in the launch into limited market release in the first quarter. Collaboration has been great and engaged on behalf of the agency. So, as we move into limited market release, we are looking to test a few things. So, the primary governor, as I said in my opening remarks, is going to be access. We have to establish broad access in the pharmacy channel. That work is underway, but will take us time to scale and so that’s going to be the governor primarily. But what we will be looking for in limited market release, just in terms of indicators that it’s successful and that we are ready to continue to expand as market access expands is we will be looking qualitatively just to understand the customer experience, the training experience and the access experience for people who are coming on to the product for multiple daily injections, for our existing users that are transitioning on to the product and for tube pump users that are transitioning on to the product. So we are just going to want it test that all of our systems, our training, our clinical support are going as we expect them to and the product experience is going as we expected to in each of those groups. As we validate that and as we establish access, that’s what we will have us expand through the rest of this year and into full market launch either later this year or early next. We can move on to the next question. Thanks.

Our next question comes from the line of Robbie Marcus from JPMorgan. Please go ahead.

Great. Congrats on a great quarter. I am going to squeeze in two into my one here. One, Shacey, I was coming at that 40% growth number over third quarter was fantastic. I am coming out for the year at something a little over 51,000 new patient adds 52,000. I just want to make sure that’s the right ballpark. And then Wayde, as you look at cadence through the year, what are you assuming for new patient growth from Omnipod 5 and how are you expecting that to impact the cadence throughout 2021? Thanks.

Yes, Wayde, do you want to take that?

Yes. Sure, I can start it, Robbie. Thanks for the question and you are right, we were very happy to see the sequential improvement from Q3 to Q4. The pandemic certainly impacted us in the middle of the year, even in the U.S. and just as importantly, international to see it. Actually, Q4 was the first quarter that we saw improve new customer starts in both regions over prior year 2019 and 2019 was a really tough comp. We had record-breaking new customer starts in 2019, so absolutely right. That sequential improvement was important for us to see. We are not going to comment on specific numbers of customers, but as we shared in our earnings release, we now have 250,000 global customers. So, it’s a good data point, I think for you. And then on new patient start growth for Omnipod 5, as Shacey said in her prepared remarks, it will be a limited release. And so there is a lot of scenarios running on that one. It really depends on what point in the year we get it launched here in the first half and then how we ramp. And as Shacey said, we are going to be monitoring a lot of things. We want to do a great job of both the user experience as well as developing access. And so again, just like Shacey said, it’s those two things that will be pacing the ramp up over time and none of that diminishes our excitement around getting Omnipod 5 into the market next year. We have had just an immense interest from customers and our teams are and have been gearing up to launch Omnipod 5 for a couple of years now. So, lot of momentum, lot of excitement building, but we want to keep ourselves in check to make sure that we have the most successful launch we can. And part of that is limiting the ramp as we move through the end of the first half and into the second half of the year.

Thank you. Our next question comes from the line of Jeff Johnson from Baird. Please go ahead.

Thank you. Good afternoon. A lot of things I would like to ask, but let me just focus, I guess, on longer term if I could and Wayde, maybe a two parter for you. I know you just gave 2021 guidance and still dealing with some COVID uncertainties. But for the past few years, we have kind of had that guiding light out there with your 5-year plan that you are calling for $1 billion in revenue by this year and mid-teens operating margins as well by this year. It looks like you are going to deliver revenue above that guidance this year, margins maybe fall short a bit for all the Omnipod 5 investment reasons you have talked about. But is there anyway to help us think about maybe the next 3 to 5 years again kind of give us a guiding light there even if you are not going to officially kind of comment on 5-year outlook? Can revenue growth sustain above 20% over the longer term here, intermediate to longer term and do margins start to expand again once we get through this heavy investment period in 2021? Do we think about margin expansion then going forward in ‘22/23 things like that? Thanks.

Yes. Thanks for your question, Jeff and we are spending a lot of time on it ourselves as well. I went through a robust long-term strategic planning session here. But we are not going to provide long-range planned guidance update until we get to the other side of Omnipod 5. It is a real pivotal launch for the company. And we are excited about what it can deliver. So we are pacing ourselves for an update to the long-range plan until we get a few quarters under our belt with Omnipod 5 and then we will be updating from there. You highlighted a few important things to the story though, which include the guidance here in 2021, which we feel is really strong, particularly for the U.S., 21% to 25% guidance for U.S. and less in international because we do see the pandemic headwinds persisting internationally more. We have covered a lot on our revenue guide in the prepared remarks. I think gross margin is pretty well understood at 67% to 70% in 2021. And there is going to be some phasing to that. We should expect Q1 to be below 67%, and then we will build into the range as we go through the year. There is quite a few drivers that will dictate whether we end up at the low end of that 67% to 70% range or at the high end. If we don’t make 70% this year, we are committed to getting to 70% over time. So I think that was a part of your question, Jeff. As we think about gross margins, they are a key component of our financial thesis and we are confident that we will get to 70% over time. And then you mentioned the bottom line as well. We have a very strong operating margin guide here for 2021 in the low double-digits. That’s a significant step up from 2020, but we should not assume the same step up beyond 2021. That is one area, while we have not guided to ‘22 and beyond, we want to make sure that everyone understands our investment thesis here, is to continue to invest to capitalize on our differentiated position in this very large unpenetrated market, both Type 1 and Type 2 markets. So you should inspect us to continue to invest heavily beyond 2021, in particular, in R&D and innovation, clinical, selling and marketing. We are going to be driving efficiencies as we scale in G&A and support functions. And so that will help us, along with the gross margin expansion to build a strengthening financial profile over time. But just to come back directly to your question, Jeff, I think we will continue to tick operating margin up annually, probably more like 1%, but not stepping it up every year like we are this year from ‘20 to ‘21. So we are not giving specific operating margin guidance for the future years, but I did want to make sure everyone fully understands our investment thesis here and that we are balancing our continued investments with our strengthening financial profile over time. So, thanks Jeff.

Thank you. Our next question comes from the line of David Lewis from Morgan Stanley. Please go ahead.

Good afternoon. Thanks for taking the question and congrats on a kind of nice quarter. Wayde, just want to come back to the Omnipod guidance globally, I mean the U.S. number, I think is a little stronger than people were expecting and obviously, the ex-U.S. number a little weaker based on the commentary you discussed in terms of European recovery, but we did see European recovery or European business in absolute dollars get better the last two quarters sequentially your guidance implies that will take a step back for the first time in the first quarter, sort of down 1Q versus 4Q. So just beyond what you’re seeing in terms of resurgence is there anything going on from a competitive perspective, 780G, Control-IQ, what have you? Because it just seems that you were seeing some improvement in Europe in the first quarter guide and the ‘22 guide – sorry, the ‘21 guide sort of doesn’t suggest that continues. So if you could flush it out, that would be great. Thanks so much.

Yes. Good question, David. Thanks. And we spend a lot of time on this because, as you know, and a lot of companies are challenged with really trying to peg guidance, and in fact, a lot of companies aren’t guiding for this specific reason. The pandemic is tough to peg, obviously, more difficult outside the U.S., at least for us. We saw a pretty significant step-up and improvement in the U.S. as we’ve progressed through the year. And as we said in our prepared remarks, we’re only 10% off of our beginning of your expectations in Q4. The U.S. was on the better side of that. So almost back to our beginning of year expectations, and it was a record-breaking quarter for us ever. And so a lot of confidence in that U.S. guide. And like you said, it’s – we think it’s a strong guide. At both the high end and the low end, it will be higher growth dollars than it was in all of 2020. International, as you mentioned, David, it is feeling more of the compounding effect of our annuity model. So because the new customer starts were heavier impacted internationally in the last three quarters of 2020, it’s going to feel it more in the first half of 2021. And then unlike the U.S., we’re anticipating further pandemic impacts, the pandemic persisting into the first half of 2021 internationally. So that continues to compound into the numbers. So it is quite dramatic. Having said that, we have got a lot of momentum in our international business too, we have got the DASH rollout across all our new – all the regions internationally. We’ve got 7 new countries. We’re making investments in sales force expansion, we’re also investing in marketing and direct-to-consumer pilots there as well. So that’s what gives us the confidence to still guide to pretty strong double digits, 10% to 15%, in the face of a challenging pandemic environment internationally. So that’s what we’re comfortable with at this point of the year here at the start and happy to be providing guidance and insights for you all. And we will certainly track it as we go throughout the year.

Thank you. Our next question comes from the line of Jayson Bedford from Raymond James. Please go ahead.

Hi, good afternoon. Just a quick one for me. The recent milestone of 250,000 users, I guess, how recent? Was that a 2020 event or 2021 and just has there been any changes in the attrition or retention, however you want to frame it? Thanks.

Sure, Jayson, yes, we are thrilled to be celebrating the milestone of 0.25 million users relying on Omnipod. It’s really exciting for the organization. That’s a recently-hit milestone. Obviously, it’s all estimates. So I always want to of predicate it with that, but that was a 2021 event. And there have not been changes in attrition or utilization. Those have really remained steady. That’s terrific, actually because, obviously, as we anticipated the impact of the pandemic, we did anticipate that potentially, attrition could tick up we didn’t see that. And that’s part of the driver behind the really strong performance in 2020 in the face of the pandemic. So that’s great news on the business model and just the customer loyalty.

Thank you. Our next question comes from the line of Chris Lin from Cowen. Please go ahead.

Hi, thanks for taking my questions. Just maybe one on Tidepool. It seems like Tidepool, could receive FDA approval eminently. I was curious if you have any commercialization plans for Omnipod and the Loop algorithm upon launch? And how this could impact your thinking Omnipod with iPhone? And more specifically, do you have anything factored into 2021 revenue guidance related to this product? Thank you.

Sure. Thanks for the question, Chris, our partnership with Tidepool has primarily been a clinical and product development one. So we’ve been supporting their regulatory submission and their development work. We don’t have a commercial agreement at this point with Tidepool. So that’s still to be worked out. I will say it’s a tremendous undertaking to do that. So there is still a lot of work ahead of us. But that said, we do – we have said that we are working under way or we have work underway here with Omnipod 5 on the iOS platform. So I think it remains to be seen who’s going to hit the market first with iOS, and we’re certainly really excited about Omnipod 5. That remains our priority at this point. And we’ll continue to support Tidepool’s efforts in terms of their submission and their development.

Thank you. Our next question comes from the line of Joanne Wuensch from Citibank. Please go ahead.

Good evening and thank you for taking the question. I was curious about the 35% to 40% Type 2 metric. That seems to be a nice step-up sequentially. And I’m just curious if some of your DTC campaigning is heading towards that, and that’s why we’re seeing that or if it’s just sort of a natural development of the market?

Sure. Thanks, Joanne, yes, we’re really excited about just the continued in the Type 2 segment. It’s just a group of users that have responded so well to the simplicity of DASH and some of the product benefits. I would say two things driving that. And one, as you know, is just increased awareness so that there are obviously a lot of people in the United States. We estimate over 2 million people living with insulin-dependent Type 2 diabetes who can benefit from the product. And so advertising as part of what’s unlocking that. The other thing is you saw the step-up in increased access. And as we drive more availability in the pharmacy, this really differentiated business model that allows people to access it with such an affordable under $50 a month in out-of-pocket costs. That is in line with the cost of multiple daily injections for example. So it is incredibly affordable broad access that doesn’t have the constraints that exist in other channels for the Type 2 segment. And that’s sort of been our strategy really. We believe as we drive more simplicity into the product, we establish broader and affordable access to the tune of access in line with the cost of multiple daily injections. That’s how we bring our technology to millions of patients, not just hundreds of thousands of patients. And so we’re excited to see that. And I think that’s part of what’s been driving the Type 2 adoption and growth.

Thank you. Our next question comes from the line of Margaret Kaczor from William Blair.

Hi, everyone. Thanks for taking the questions. I’ve got a couple of follow-ups on the Type 2s to Joanne’s point. So can you guys give us a sense of how big Type 2s are as a percentage of the installed base what percent maybe have coverage under pharmacy? Is it close to that 75% that you referenced on the call for the Type 1 patients? And then anything around utilization for these Type 2 patients, given they are in some insulin needs versus a Type 1?

Sure. Yes, I’ll start, and then Wayde may have some color to add. Unfortunately, we don’t have a lot of visibility. I’ll explain why. As we drive more utilization into the pharmacy channel, we have less visibility at this point to diagnosis at coverage. And so that is a little bit of a challenge for us because, obviously, all of our Medicare reimbursement is through the pharmacy channel. And 40% of people living with insulin-dependent Type 2 diabetes are over the age of 50 or 60. And so you can imagine that there is a lot of overlap behind our Medicare coverage in the pharmacy channel and the Type 2 segment. In terms of access, 75% is a number for all commercial coverage. There actually isn’t a distinction in the pharmacy channel between Type 1 and Type 2 coverage. So that number is good for both segments. And given the progress we’ve made, particularly in Medicare Access, coverage is very strong and probably at $0 out-of-pocket for the Medicare user. So it’s a really affordable, really broad access for the Type 2 user in the pharmacy channel, particularly for the Medicare Type 2 user. So I think all of that is contributing to the growth. And unfortunately, we don’t have an updated total base number from what we gave a few years ago because we’ve been driving so much growth into the pharmacy channel. This is great for users, great for payers and great for us. But right now comes with a bit of a visibility challenge.

Thank you. Our next question comes from the line of Matt O’Brien from Piper Sandler.

Hi, this is Karen on for Matt. We were hoping you could provide an update on the iPhone compatibility for Omnipod 5, do you think that will come later this year or will that be more of a 2022 event? And with over half of the population having an iPhone, how are you making sure that isn’t a limitation uptake?

Sure. So we’re not going to give an update on the timeline. We really want to get Omnipod 5 to market, and then we can start updating time lines for all the innovations that will follow around additional sensor integrations and additional phone platforms. But I have said multiple times in the last couple of calls that this work is underway. So we have teams of very talented people working on iOS phone control. We don’t envision this will be a limiting factor for two reasons. One is we will provide every user a back up PDM with SIM technology. This gives users a constant connectivity to data and all the benefits of Omnipod 5. And remember, you only need that PDM or your Samsung phone if you’re using phone control to pair a pod and to announce a meal. Otherwise, and for every 3 days when you time a pod. But otherwise, you can remain in automated mode in closed-loop because of the algorithm on the pod without your phone or your PDM, and all of your data is able to be viewed via our apps on your iPhone. So you’re still going to get all of that visibility and ease of use through our apps on your iPhone. So we think it’s going to be a great user experience for Apple users, and we’re working very hard to get them full phone control as quickly as possible, and we’ll update once we get to market with Omnipod 5.

Thank you. Our next question comes from the line of Anthony Petrone from Jefferies.

Hi, thank you. A quick one for Shacey and quick one for Wayde. One would be on the preschool opportunity for Omnipod 5? And can you quantify how large that opportunity is? And maybe characterize the demand among parents to get preschoolers on an automated solution? And a quick one for Wayde would be on the automated U.S. and China lines when those reach scale, how would you quantify the gross margin tailwind? Thanks.

Thanks, Anthony, I don’t have a size for the preschool segment. This is a smaller segment, so ages 2 to 6. But I can tell you it’s an outsized importance segments, both in terms of the value of the technology to this group as well as the value of this group to Insulet. Today, we are the market leader in pediatrics. We see our ability to maintain and expand that segment. You think about the benefits of Omnipod for this segment, the ease of use and the discretion for young active children versus small active children having to contend with 3 to 4 feet of tubing and a large device, it’s a particularly differentiated technology today without CGM integration and automated insulin delivery. And when we combine that for this group, it’s going to be incredibly powerful. So we know, based on the response and the feedback from our trial participants, and I think the strong indicator that 100% of users completed the trial and moved on to the extension phase, all really important indicators that we’re going to have a winning product in this population.

Great. Thanks for the question on the operations strategy as well. Anthony, it’s critical to our overall strategy, given that we want to make sure that we not only have capacity but also quality products and redundancy across the globe to make sure we can continue servicing our customers. And so along your question, from the automated lines in the U.S., we have two producing now and a third line installed that will be producing salable product on this year. So that more than doubles the capacity in our legacy China facility. And then you referenced the other China lines, which is the fact that we stood up a second third-party manufacturer in China during 2020, which also doubles our capacity out of our legacy facility. So, all of that together gives us significant capacity increase as well as the ability to balance it between the facilities. And that redundancy is important for us. The gross margin tailwind, it is the single largest driver, actually, of our gross margin improvement over time. As we begin to put more volume through all the plants, we scale more efficiently but in particular, our U.S. manufacturing facility that is automated and has mostly fixed costs limited variable costs. The more volume we put through there will become the most efficient plant that we have and so that will be a gross margin tailwind for us. So, all of the operations strategies are designed, number one, to get good quality product, a reliable product to our customers and also drive gross margin favorability for us.

Thank you. So our next question comes from the line of Matt Taylor from UBS.

Hi, thanks for taking the question. So question I had was you mentioned avid working on these sensor integration. So I was hoping you could just flesh that out a bit more and talk about the partnership and the timing there to any extent that you can?

Sure, Matt. We’re excited to be partnered with Abbott. Their product has been particularly adopted in international markets. There are certain countries where they are a dominant shareholder. And as they continue to drive ease of use and awareness, they are a terrific partner for us. As I mentioned, we won’t be giving updated time lines until we get our current generation with DexCom out into the market. We’re very excited about the value that, that’s going to drive. But both sensor partners, DexCom and Abbott, are driving, they are transforming the market. They are bringing real-time insights to users. And that adoption is helping to fuel Omnipod adoption. And so both are very important to us. And we see the potential to bring a long line of innovations with our partnerships with both DexCom and Abbott. So we are working on that. Just like iOS, we have had teams of people focused on that integration, and that work is underway and excited to update the market after we get Omnipod 5 to the market.

Thank you. So our next question comes from the line of Mathew Blackman from Stifel. Please go ahead.

Good afternoon, everyone. Thanks very much for the question. Just thinking ahead to the ENDO meeting next month, looking at some of the early abstracts posted on the meeting website. It looks like beyond the pivotal study, there is also a presentation from Dr. Bode looking at Omnipod 5 in Type 2 patients. Can you just remind us what that study is and how it relates to or even helped inform the larger Type 2 study you just started to enroll? Thanks.

Sure. Yes, that’s a great question. So Dr. Bode will be presenting some early results from our feasibility study in Type 2. So if you remember, we had mentioned on the last call that we had launched our feasibility work. And I mentioned in my remarks today that, that continues, enrollment continues. That research is going very well. We expect, and we are learning great things regarding the Type 2 segment. And so from those learnings, we will then enter into a larger pivotal study, which will then drive expansion in indications and the label for Omnipod 5. So that is what will play out over the coming months and potentially, a year or longer. We haven’t given a timeline on that. But Dr. Bode will be sharing his experience and his research with Omnipod 5 in the Type 2 segment. We believe that our technology can bring tremendous value to this segment to drive improved outcomes, certainly and tremendous ease of use. And so we are committed to doing the research, and he’s been a great partner with us on that front.

Thank you. So our next question comes from Kyle Rose from Canaccord. Please go ahead.

Great. Thank you very much for taking the questions. I think I heard you say this, Shacey, in the prepared remarks. So correct me if I’m wrong, but it sounded like you’ll be launching O5 or the Omnipod 5 only in the pharmacy channel. So I guess question one, is that correct? And then two, it sounded like access is going to be one of the more important drivers during the limited launch. So maybe just help us think about the time line to getting broader access in the pharmacy channel for Omnipod 5 and maybe some of the conversations you’ve had with payers that have driven your decision to go solely on the pharmacy side?

Sure. Kyle, you heard that correct that we will be launching Omnipod 5 in the pharmacy channel, and we will be launching at price parity. So that was a very thoughtful decision that we’ve made. And the goal behind that is really just to drive more rapid access and more affordable access. And so what this means, it’s actually really exciting because what this means is, today, as I mentioned earlier, a DASH user pays less than $50 a month on average for the technology, we’re going to be able to bring our remarkable and advanced technology in Omnipod 5 for the same type of co-pay for users. I mean, in line with MDI for many users. So that is really exciting, and we think the right thing to do to truly unlock this population. It’s a great channel for payers, a great channel for patients and a great channel for Insulet. We are driving into the pharmacy channel because of all of the benefits that we’ve talked about, and we view Omnipod 5 as an opportunity to bring more users into that channel, which has great benefits for payers and for patients, frankly. So – and you are right that access will be the primary governor. I think back to DASH, we established – it took us about 2 years to establish broad access, where we are in the 70% plus range with DASH. And I would expect, if you think about what we were doing with DASH, we were also launching a new business model and establishing the channel, so, all of our partnerships and IT integrations with wholesalers and pharmacies. All of that work is now transferable and there and established for Omnipod 5. Our conversations are underway with payers and making good progress. And so we do expect that we will establish access more rapidly than DASH. But at this point, I think that’s the primary performance indicator that we will be updating all of you on is just how we’re doing with covered lives because that’s going to be the primary driver of our success as we move through the limited market release.

Thank you. So our next question comes from the line of Steven Lichtman from Oppenheimer & Co. Please go ahead.

Thank you. Hi, everyone. Shamcey, on Omnipod 5 for new potential customers interested in getting it who can’t yet as you ramp pharmacy access, is there any reason for them to hold off or is it – will it be pretty seamless for someone moving from DASH to Omnipod 5 PDM? Any thoughts on how that transition from DASH to Omnipod 5 will work for customers that would be great?

Yes. No reason for them to hold off. In fact, there may be reasons for them to get on, and I’ll explain that. And when we think about the training pathways, the user interface with DASH is sort of the foundation and the user experience is the foundation for Omnipod 5 and so the training is likely to be much more streamlined for somebody who is moving from, for example, Omnipod DASH to Omnipod 5. And so it may just help you speed up if you get onto Omnipod DASH, as you’re headed to Omnipod 5, but certainly no reason to hold off. As we said, we are not going to be charging any upfront conversion fee. Anybody, frankly, who is using any technology, whether that is Omnipod DASH, whether that is legacy Omnipod or MDI or a tube pump. As soon as we have pharmacy access established for them, they should be able to get on to the product with no upfront fee and very reasonable out-of-pocket costs. And we’ve worked really hard to kind of conceive of and deploy that strategy to help bring our technology to more people more rapidly.

Thanks, Shacey.

Thank you. Our next question comes from the line of Ravi Misra from Berenberg Capital. Please go ahead.

Hi, thanks for taking the question. Can you hear me okay?

Yes, we got you.

Hey, great. Thanks. So I just wanted to – sorry if I asked, if this has been asked, I’m jumping between calls. But just on the Type 2 kind of commentary that you’ve been seeing, very strong adoption, very impressive in my view. Just from – can you help understand kind of what – it seems like there is a little bit of a kind of victorious circle or going on here between CGM adoption and Type 2 in pump adoption. Can you kind of maybe help tease out some of the dynamics there in terms of as access is getting easier for both? Is it kind of your kind of technology that’s leading more people to get on to CGM, therefore, creating a virtuous cycle there or is it CGM usage that’s kind of bringing your guys into there? And then maybe layering on how we think about the Abbott product and the work that you may be doing with them in this Type 2 segment? Thanks.

Sure. I think all great observations there. There are, in my view, three things that are driving Type 2 adoption for Omnipod. And the first is we have the right business model in the right channel for Type 2 users. So the fact that we can provide this very affordable, broad access with very few constraints as part of what is driving adoption. The second is just increasing awareness of the simplicity of our technology, and that’s coming through our efforts on both the sales and marketing front. And the third is CGM adoption. And this is actually a really important dynamic for us. As we think about not just 2021, but the next several years. What the CGM companies have done is really dramatically displace blood glucose monitoring in the Type 1 population. And now they have their sites set on the Type 2 population. And we’ve been benefiting significantly from that conversion as patients, first in Type 1 and now more significantly, in Type 2. As these users get visibility to their data and how little time they are spending in range, they are looking for tools like Omnipod to help get them in range, and they are also comfortable wearing something because CGM has gotten them over that psychological barrier. So all three of those things are helping to drive our success in Type 2, and I think the technology is really well suited. So as we see progress and further advancement in adoption of CGM, this is a great trend for us in the market.

Thank you. I show our last question comes from the line of Danielle Antalffy from SVB Leerink. Please go ahead.

Hey, good afternoon, everyone. Thanks so much for squeezing me in and congrats on a pretty stellar year given the environment actually regardless of the environment. Shacey, question for you on Type 2 and how we should think about just echoing everyone’s sentiment. I mean you’ve done so well there. But what should we be thinking from an ultimate penetration perspective for insulin-dependent Type 2 patients? I mean is this a patient population given the barriers that you guys have broken down you think could reach close to – or maybe let’s put it, standard of care versus MDIs or is there some different way to that this patient population manages their disease that they just might not be relevant per pump, the majority of them? Can you help us understand what you are thinking for ultimate penetration? Sorry, that was really long.

Sure. Yes, sure. I think I won’t comment on ultimate penetration because I just think it’s going to take time with this segment. We’re just in really early days here relative to the Type 1 segment. So we’re more comfortable saying, hey, Type 1s can get over 50% because we’re mature and we’re – we see where we are in that adoption curve. We’re standing on the precipice with Type 2s, and we’re seeing great adoption, but it’s very small penetration into this massive opportunity. When you think about the intensively managed Type 2 user, there really isn’t much different in their need. And we do think that all of the work we’re doing to establish broad, affordable access to drive unparalleled simplicity into our technologies that those advantages are, I would argue, more important for the Type 2 user than the Type 1 user. But regardless, they are important for all of our users and should drive continued adoption. And we see both segments, Type 1, particularly as we start – as we bring Omnipod 5 to market, we think that will be an accelerator for growth in the marketplace. And then as we look at Type 2, we’ve got a product today that is incredibly simple and being very enthusiastic embraced. And then as we – kind of the next wave is as we bring the simplicity of Omnipod 5 to the Type 2 market, we think that can further unlock it. So we’re excited about the long-term prospects for the Type 2 space.

Thank you. This concludes our Q&A session. I would like to turn the conference back to Shacey Petrovic.

Thank you. I wanted to share that recently one of our Omnipod 5 principal investigators for our pivotal study, Dr. Desalvo, from Baylor, he shared his feedback on Omnipod 5 with us. And what he said was to, not only have you achieved outstanding clinical results, but the diabetes burden has been ameliorated. And the satisfaction is unlike anything I have experienced before, especially for caregivers. It’s clear that this is about the patients and their families. And he is right it is about our customers and their families. This is what gets us going every single day. We are so proud of the progress we’ve made. We’re now changing the lives of 0.25 million people across the globe, and we’re not going to stop there. Insulet and our customers’ days – best days are still ahead. So thank you very much. Have a great evening. We will talk to you next quarter.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participation, and have a wonderful day. You may all disconnect.