Insulet 10-Q 2024-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended March 31, 2024

OR

Commission File Number 001-33462

INSULET CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s Telephone Number, Including Area Code: (978) 600-7000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

As of May 2, 2024, the registrant had 70,039,511 shares of common stock outstanding.

TABLE OF CONTENTS

Table of Contents

PART I - FINANCIAL INFORMATION

INSULET CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included in this quarterly report. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs, which are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed under the headings “Risk Factors” and “Forward-Looking Statements” in both our Annual Report on Form 10-K for the year ended December 31, 2023 and in this quarterly report.

Overview

Our mission is to improve the lives of people with diabetes. We are primarily engaged in the development, manufacture and sale of our proprietary Omnipod platform, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod platform includes: Classic Omnipod, its next generation Omnipod DASH, the most recent generation Omnipod 5, and our latest innovation, Omnipod GO, all of which eliminate the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing. Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like Personal Diabetes Manager (“PDM”) with a color touch screen user interface. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system, that integrates with continuous glucose monitors (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. The CGMs are sold separately by third parties. Omnipod GO, for which we are currently conducting a pilot program in the United States, is our basal-only Pod for individuals with type 2 diabetes aged 18 and older who require insulin.

Our financial objective is to sustain profitable growth. To achieve this, we launched Omnipod 5 in the United States in 2022, and in the United Kingdom and Germany in June and August 2023, respectively. Most recently, in April 2024, we launched our limited market release of Omnipod 5 in the Netherlands. We are working on further building our international teams and advancing our regulatory, reimbursement, and market development efforts so we can bring Omnipod 5 to additional international markets.

We are also preparing for an expanded indication for Omnipod 5 for type 2 users. In March 2024, the last participant completed our type 2 pivotal trial. We expect to submit the results to the U.S. Food and Drug Administration (“FDA”) for an expanded indication by the end of 2024.

Additionally, we recently completed participant enrollment in our RADIANT study in France, the U.S, and Belgium, which is our Omnipod 5 with Libre 2 randomized controlled trial. Similar to the randomized control trial that we completed in the U.S. and France for Omnipod 5 with DexCom’s G6 CGM, the objective is to provide data to support our pricing and market access initiatives as we roll out Omnipod 5 with multiple sensors across our international markets.

We also continue to focus on our product development efforts, including automated insulin delivery (“AID”) offerings, such as choice of smartphone integration and CGM, and enhancing the customer experience through digital product and data capabilities. In February 2024, we began our limited market release of Omnipod 5 with Dexcom’s G7 CGM in the United States, Similarly, in April 2024 we launched a limited market release of Omnipod 5 with Libre 2 Plus for individuals aged two years and older with type 1 diabetes in both the U.K. and the Netherlands, where we now offer sensor of choice (integration with either Abbott’s Freestyle Libre 2 Plus sensor or Dexcom’s G6 CGM). Additionally, we plan to launch a limited market release of Omnipod 5 with our iOS app for iPhone in the U.S. this year.

Finally, we continue to take steps to strengthen our global manufacturing capabilities. We are in the final stages of validating our manufacturing lines at our newly constructed manufacturing plant in Malaysia and expect to being producing salable product in 2024. This plant provides us with increased capacity to satisfy our growing demand, supports our international expansion strategy, and is expected to drive higher gross margins over time. We plan to begin production at this facility in 2024.

Results of Operations

Factors Affecting Operating Results

Our Pods are intended to be used continuously for up to three days, after which it may be replaced with a new disposable Pod. The unique patented design of the Omnipod allows us to provide Pod therapy at a relatively low or no up-front investment in regions where reimbursement allows for it and our pay-as-you-go pricing model reduces the risk to third-party payors. As we grow our customer base, we expect to generate an increasing portion of our revenues through recurring sales of our disposable Pods, which provide recurring revenue.

We continue to experience challenges stemming from the global supply chain disruption; however, while there is no guarantee of future performance, to date we have been able to successfully mitigate this disruption and ensure uninterrupted supply to our customers by increasing our inventory levels and taking other measures. While our mitigation efforts and inflation have and are expected to continue to negatively impact gross margins and net income throughout the year, we intend to continue to work to improve productivity to help offset these costs.

Revenue

(1) Constant currency revenue growth is a non-GAAP financial measure, which should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. See “Management’s Use of Non-GAAP Measures.”

Total revenue for the three months ended March 31, 2024 increased $83.6 million, or 23.3%, to $441.7 million, compared with $358.1 million for the three months ended March 31, 2023. Constant currency revenue growth of 22.8% was primarily driven by higher volume and, to a lesser extent, favorable sales channel mix and increased drug delivery revenue.

U.S.

Revenue from the sale of Omnipod products in the U.S. increased $58.7 million, or 22.7%, to $317.7 million for the three months ended March 31, 2024, compared with $259.0 million for the three months ended March 31, 2023. This increase primarily resulted from higher volume through the pharmacy channel driven by growing our customer base and, to a lesser extent, a higher average selling price. These increases were partially offset by a decrease in estimated inventory days-on-hand at distributors, and lower conversions to Omnipod 5. We experienced a significant benefit from conversions to Omnipod 5 in the prior year following the launch of the product in the latter half of 2022 since users generally fill both their Omnipod 5 starter kit and their first month of refills simultaneously.

Revenue from the sale of Omnipod products in the U.S. for the three months ended March 31, 2024 included $111.8 million of related party revenue, compared with $96.8 million for the three months ended March 31, 2023. The $15.0 million increase resulted from growth through the pharmacy channel.

For full year 2024, we expect strong U.S. revenue growth driven by continued volume growth of Omnipod 5, the benefits of our recurring revenue model and, to a lesser extent, higher average selling prices of Omnipod 5. We expect these increases to be partially offset by a decrease in estimated inventory days-on-hand at distributors and lower conversions from Classic Omnipod and Omnipod DASH to Omnipod 5 since the vast majority of U.S. conversions to Omnipod 5 occurred in 2023.

International

Revenue from the sale of Omnipod products in our international markets increased $16.7 million, or 16.9%, to $115.3 million for the three months ended March 31, 2024, compared with $98.6 million for the three months ended March 31, 2023. Excluding the 2.1% favorable impact of currency exchange, the remaining 14.8% increase in revenue was primarily due to higher volumes from the launch of Omnipod 5 in the U.K. and Germany, and to a lesser extent, a higher average selling price of Omnipod 5 compared with Omnipod DASH and Classic Omnipod. These increases were partially offset by higher attrition in the countries where we have not yet launched Omnipod 5 as we continue to be impacted by competition from AID systems.

For full year 2024, we expect higher International Omnipod revenue due to continued volume growth driven by new customers and conversions to Omnipod 5 in the U.K. and Germany. We expect these increases to be partially offset by higher attrition in countries where we have not yet launched Omnipod 5.

Drug Delivery

Substantially all of our Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy. Drug Delivery revenue for the three months ended March 31, 2024 was $8.7 million, compared with $0.5 million for the three months ended March 31, 2023. The $8.2 million increase is driven by higher volume resulting from timing of production in the prior year. For full year 2024, we expect Drug Delivery revenue to decline $18 million to $22 million due to a lower forecast from our partner and a lower selling price.

Operating Expenses

Cost of Revenue

Cost of revenue for the three months ended March 31, 2024 increased $17.3 million, or 14.7%, to $134.9 million, compared with $117.6 million for the three months ended March 31, 2023. Gross margin was 69.5% for the three months ended March 31, 2024, compared with 67.2% for the three months ended March 31, 2023. The 230 basis point increase in gross margin was primarily driven by higher average selling prices and improved manufacturing efficiencies. These increases were partially offset by an $8.0 million, or 220 basis point warranty accrual reversal during the three months ended March 31, 2023 associated with the voluntary Medical Device Correction (“MDC”) notices we issued in 2022, which did not recur in the current period.

For full year 2024, we expect gross margin to be in the range of 68% to 69%. We anticipate gross margin to be relatively level due to higher average selling prices and improved manufacturing efficiencies, partially offset by $11.5 million of income associated with a reduction to our warranty accrual in 2023 associated with the voluntary MDC notices issued in 2022, which will not recur, and higher costs associated with our new product launches.

Research and Development Expenses

Research and development expenses of $50.2 million for the three months ended March 31, 2024 were level with the three months ended March 31, 2023. Research and development expenses as a percent of revenue declined to 11.4% for the three months ended March 31, 2024, compared with 14.0% for the three months ended March 31, 2023, primarily due to an increase in sustaining costs following the launch of Omnipod 5 in the United States and Europe, which are included in selling, general and administrative expenses. We expect research and development spending for the full year 2024 to increase compared with 2023 as we continue to invest in advancing our innovation and clinical pipeline.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2024 increased $37.0 million, or 22.7%, to $199.7 million, compared with $162.7 million for the three months ended March 31, 2023. This increase was primarily attributable to year-over-year headcount additions to support commercial operations and international growth, as well as our new organizational structure that is designed to accelerate innovation and commercialization. To a lesser extent, the increase was due to higher costs associated with the continued commercial rollout of Omnipod 5 in international markets, as well as higher legal fees and consulting costs to support our business growth. These increases were partially offset by a decrease in direct-to-consumer advertising spend.

We expect selling, general and administrative expenses to increase in 2024 compared with 2023 due to investments in our operating structure, primarily headcount additions, to facilitate continued growth, including customer support. We also plan to make additional investments to support the Omnipod platform, including market acceptance and access, and the phased launch of Omnipod 5 in our international markets.

Non-Operating Items

Interest Expense

Interest expense for the three months ended March 31, 2024 increased $1.3 million to $10.7 million, compared with $9.4 million for the three months ended March 31, 2023. This increase was primarily driven by fees paid associated with amending our Term Loan in January 2024, which is discussed in Note 9 to our consolidated financial statements.

Interest Income

Interest income for the three months ended March 31, 2024 increased $2.9 million to $9.4 million, compared with $6.5 million for the three months ended March 31, 2023. This increase was primarily driven by higher interest rates and increased average cash balances.

Income Tax Expense

Income tax expense was $3.4 million on pre-tax income of $54.9 million for the three months ended March 31, 2024, and $0.8 million on pre-tax income of $24.6 million for the three months ended March 31, 2023. Our effective tax rate was 6.2% and 3.4% for the three months ended March 31, 2024 and 2023, respectively. The 280 basis point increase in the effective tax rate primarily resulted from

changes in the distribution of income among the jurisdictions in which we operate and a corresponding reduction to available net operating loss carryforwards that reduce taxable income.

As of March 31, 2024, we maintain a full valuation allowance against our net deferred tax assets in the U.S. and the U.K. Given our positive trend in earnings and anticipated future earnings, we believe there is a reasonable possibility that during 2024, sufficient positive evidence will exist to allow us to reach a conclusion that our valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of approximately $200 million of deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded.

In 2021, the Organization for Economic Co-operation and Development (“OECD”) and G20 international forum released the Model Global Anti-Base Erosion (GloBE) rules (“Model Rules”) under Pillar Two. These Model Rules set forth the common approach for a Global Minimum Tax at 15% for multinational enterprises with revenue greater than €750 million and is expected to be applicable to Insulet. In December 2022, Pillar Two was adopted by the Council of the European Union for implementation by European Union member states by December 31, 2023, with effect for tax years beginning in calendar year 2024. Similar directives under Pillar Two are already adopted or expected to be adopted by taxing authorities in other countries where Insulet has business operations, with widespread implementation of the Global Minimum Tax in calendar years 2024 and 2025. While we currently do not expect the Model Rules for Pillar Two and related legislation to have a significant impact on our financial statements, we are continuing to evaluate their potential impact.

Adjusted EBITDA

The table below presents reconciliations of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”):

Non-GAAP Financial Measures

Management uses the non-GAAP financial measures described below.

Constant currency revenue growth represents the change in revenue between current and prior year periods using the exchange rate in effect during the applicable prior year period. We present constant currency revenue growth because we believe it provides meaningful information regarding our results on a consistent and comparable basis. Management uses this non-GAAP financial measure, in addition to financial measures in accordance with GAAP, to evaluate our operating results. It is also one of the performance metrics that determines management incentive compensation.

Adjusted EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and other significant transactions or events, such as legal settlements, medical device corrections, gains (losses) on investments, and loss on extinguishment of debt, that affect the period-to-period comparability of our performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our performance, and we believe that it is helpful to investors and other interested parties as a measure of our comparative performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.

These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.

Liquidity and Capital Resources

We believe that our current liquidity as further described below will be sufficient to meet our projected operating, investing and debt service requirements for at least the next twelve months.

Capitalization

The following table contains several key measures to gauge our financial condition and liquidity at the end of each period:

Convertible Debt

To finance our operations and global expansion, we have periodically issued convertible senior notes, which are convertible into our common stock. As of March 31, 2024, the following Convertible Notes were outstanding:

(1) Per $1,000 face value of notes

Credit Agreement

We have a $300.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which expires in 2028. At March 31, 2024, no amount was outstanding under the Revolving Credit Facility. The Revolving Credit Facility contains a covenant to maintain a specified leverage ratio when there are amounts of at least 35% of the aggregate Revolving Credit Facility outstanding. It also contains other customary covenants, none of which are considered restrictive to our operations. Additionally, we have a term loan, which matures in 2028, that contains covenants restricting or limiting our ability to incur additional indebtedness, make asset dispositions, create or permit liens, sell, transfer or exchange assets, guarantee certain indebtedness, and make acquisitions and other investments.

Additional information regarding our debt is provided in Note 9 to the consolidated financial statements.

Summary of Cash Flows

Operating Activities

Net cash provided by operating activities of $87.6 million for the three months ended March 31, 2024 was primarily attributable to net income, as adjusted for depreciation and amortization, and stock-based compensation expense. The working capital cash outflow was negligible as the $55.5 million increase in accounts payable and $36.6 million decrease in accounts receivable were almost entirely offset by a $62.3 million decrease in accrued expenses and other liabilities and a $29.6 million increase in inventories. The increase in accounts payable was primarily driven by the timing of payments. The decrease in accounts receivable was primarily due to a decrease in revenue compared to the fourth quarter of 2023 driven by seasonality. The decrease in accrued expenses and other liabilities was primarily driven by the annual payout of cash bonuses for performance in the prior year and a decrease in accrued rebates mainly due to lower revenue subject to pharmacy rebates during the three months ended March 31, 2024. Finally, the increase in inventories was primarily driven by a planned inventory build, primarily raw materials, to satisfy demand and mitigate supply chain risk.

Investing Activities

Net cash used in investing activities was $24.0 million for the three months ended March 31, 2024, compared with $42.1 million for the three months ended March 31, 2023.

Capital Spending—Capital expenditures were $22.1 million and $10.5 million for the three months ended March 31, 2024 and 2023, and primarily related to the purchase of equipment to increase our manufacturing capacity. We expect capital expenditures for 2024 to increase compared with 2023 given the timing of spending on machinery, equipment and tooling for our new Malaysia manufacturing facility and to support continuous improvement efforts in our other manufacturing locations. To a lesser extent, we expect capital expenditures to increase due to investments in our information technology infrastructure. We expect to fund our capital expenditures using existing cash.

Investments in Developed Software—Investments in developed software were $1.9 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively, and primarily related to investments in projects to support our cloud-based capabilities.

Acquisitions and Investments—During the three months ended March 31, 2023, we paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based AID technologies. We also paid a purchase price holdback of $3.0 million associated with our 2022 acquisition of substantially all the assets related to the manufacture and production of shape-memory alloy wire assemblies used in the production of our product from Dynalloy, Inc. Additionally, during the three months ended March 31, 2023, we made a $2.0 million strategic investment in a private company.

Financing Activities

Net cash used in financing activities was $14.1 million for the three months ended March 31, 2024, compared with $12.1 million for three months ended March 31, 2023.

Debt Repayments—During the three months ended March 31, 2024, we made $9.1 million in aggregate principal payments on our equipment financings, term loan, and mortgage, compared with $6.7 million during the three months ended March 31, 2023.

Finance Lease Repayments—During the three months ended March 31, 2024, we made $5.8 million in finance lease repayments associated with our Malaysia manufacturing facility.

*Proceeds from Option Exercises—*Proceeds from option exercises were $5.8 million and $6.0 million for the three months ended March 31, 2024 and 2023, respectively.

*Payment of Taxes for Restricted Stock Net Settlements—*Payments for taxes related to net restricted and performance stock unit settlements were $5.0 million and $11.4 million for the three months ended March 31, 2024 and 2023, respectively. The $6.4 million decrease was primarily driven by a lower fair market value of the restricted stock units that vested during the period.

Off-Balance Sheet Arrangements

As of March 31, 2024, we had $19.8 million of letters of credit outstanding, primarily under our $20.0 million uncommitted letter of credit facility to backstop bank guarantees for the same amount. The bank guarantees primarily serve as security for our newly constructed manufacturing building in Malaysia until we purchase the property. We pay interest on outstanding borrowings and commitment fees on the maximum amount available to be drawn under the letters of credit at a rate of between 1.65% and 2.25%, depending on our credit rating. The letters of credit include customary covenants, none of which are considered restrictive to our operations. We had letters of credit outstanding totaling $20.9 million as of December 31, 2023.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

Our accounting policies for revenue recognition, income taxes, product warranty and inventory reserves are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Accounting Standards Issued and Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires disclosure of incremental segment information on an annual and interim basis, including enhanced disclosures about significant segment expenses. We are required to comply with these new disclosure requirements beginning with our annual filing for 2024. The guidance is applied retrospectively. We do not plan to early adopt ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 includes improvements to income tax disclosures primarily related to information about rate reconciliation and income taxes paid. The new guidance requires disclosure of specific categories and greater disaggregation of information in the rate reconciliation and adds a requirement to disaggregate income taxes paid by jurisdiction. The new guidance also requires disclosure of pretax income disaggregated between domestic and foreign, income tax expense (or benefit) disaggregated by federal, state, and foreign, and removes certain existing disclosure requirements. We are required to comply with these new disclosure requirements beginning with our annual filing for 2025. The guidance may be applied on a prospective basis or retrospective basis. We do not plan to early adopt the requirements of ASU 2023-09.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations and financial condition.

The outcomes of the events described in these forward-looking statements are subject to risks, uncertainties and assumptions. These risks and uncertainties include, but are not limited to:

• our dependence on a principal product platform;

• the impact of competitive products, technological change and product innovation;

• our ability to maintain an effective sales force and expand our distribution network;

• our ability to maintain and grow our customer base;

• our ability to scale the business to support revenue growth;

• our ability to secure and retain adequate coverage or reimbursement from third-party payors; the impact of healthcare reform laws;

• our ability to design, develop, manufacture and commercialize future products;

• unfavorable results of clinical studies, including issues with third parties conducting any studies, or future publication of articles or announcement of positions by diabetes associations or other organizations that are unfavorable;

• our ability to protect intellectual property and other proprietary rights;

• potential conflicts with the intellectual property of third parties;

• our inability to maintain or enter into new license or other agreements with respect to continuous glucose monitors, data management systems or other rights necessary to sell our current product and/or commercialize future products;

• worldwide macroeconomic and geopolitical uncertainty as well as risks associated with public health crises and pandemics, including government actions and restrictive measures implemented in response, supply chain disruptions, delays in clinical trials, and other impacts to the business, our customers, suppliers, and employees;

• international business risks, including regulatory, commercial and logistics risks;

• the potential violation of anti-bribery/anti-corruption laws; the concentration of manufacturing operations and storage of inventory in a limited number of locations;

• supply problems or price fluctuations with sole source or third-party suppliers on which we are dependent;

• failure to retain key suppliers or other manufacturing issues;

• challenges to future development of our non-insulin drug delivery product line;

• failure of our contract manufacturer or component suppliers to comply with the U.S. Food and Drug Administration’s quality system regulations;

• extensive government regulation applicable to medical devices as well as complex and evolving privacy and data protection laws;

• adverse regulatory or legal actions relating to current or future Omnipod products;

• potential adverse impacts resulting from a recall, discovery of serious safety issues, or product liability lawsuits relating to off-label use;

• breaches or failures of our product or information technology systems, including by cyberattack;

• loss of employees or inability to identify and recruit new employees;

• risks associated with potential future acquisitions or investments in new businesses;

• ability to generate sufficient cash to service our indebtedness or raise additional funds on acceptable terms or at all;

• the volatility of the trading price of our common stock;

• risks related to the conversion of outstanding Convertible Senior Notes; and

• potential limitations on our ability to use our net operating loss carryforwards.

The risk factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report could cause our results to differ materially from those expressed in forward-looking statements. In addition, there may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. Actual results could differ materially from those projected in the forward-looking statements; accordingly, you should not rely upon forward-looking statements as predictions of future events. We expressly disclaim any obligation to update these forward-looking statements other than as required by law.

Refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our market price sensitive instruments and foreign currency exchange risk.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“the Exchange Act”), as amended, is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on the evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal financial officer) concluded that, as of that date, our disclosure controls and procedures were not effective due to the material weakness identified in the fourth quarter of 2023 described below.

Material Weakness in Internal Control Over Financial Reporting

As previously disclosed in "Part II. Item 9A. Controls and Procedures" in our Annual Report on Form 10-K for the year ended December 31, 2023, our chief executive officer and chief financial officer concluded that our internal control over financial reporting was not effective, due to a material weakness relating to information technology general controls (“ITGCs”). Specifically, the Company did not design and maintain effective ITGCs around systems that support the Company’s financial reporting outside of North America. Automated and manual business process controls that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely affected to the extent that they rely upon information and configurations from the affected systems.

Remediation Activities

Management has been actively engaged in remediating the deficiencies described above. The following remedial actions were taken during the quarter ended March 31, 2024:

• Designed ITGCs over the system used by an outsourced provider, and

• Implemented enhanced procedures related to security access controls over the Company’s enterprise resource planning (“ERP”) system.

As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above. Management believes that these actions will remediate the material weakness; however, the material weakness will not be considered remediated until management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as described below.

In connection with our initiative to integrate and enhance our global information technology systems and business processes, we implemented our new ERP system in North America. The implementation was completed during the first quarter of 2024. As a result

of this implementation, we modified certain existing internal controls over financial reporting as well as implemented new controls and procedures related to the ERP system as of March 31, 2024.

PART II - OTHER INFORMATION

Information regarding our material pending legal proceedings, if any, is provided in Note 12 to the condensed consolidated financial statements in this Form 10-Q and incorporated herein by reference.

Refer to the “Risks Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of risks to which our business, financial condition, results of operations and cash flows are subject. There have been no material changes to the risk factors disclosed in the aforementioned Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Rule 10b5-1 Plans

During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.