Insulet (PODD) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for Q1 2023 report total revenue of $358.1 million and net income of $23.8 million Condensed Consolidated Balance Sheets Total assets reached $2,289.1 million as of March 31, 2023, with total liabilities at $1,786.3 million and stockholders' equity at $502.8 million Balance Sheet Items | Balance Sheet Items (in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $1,330.0 | $1,314.0 | | Total assets | $2,289.1 | $2,251.1 | | Total current liabilities | $383.3 | $364.7 | | Total liabilities | $1,786.3 | $1,774.7 | | Total stockholders' equity | $502.8 | $476.4 | Condensed Consolidated Statements of Operations Q1 2023 total revenue increased 21.2% to $358.1 million, but operating income declined to $27.7 million and net income to $23.8 million Income Statement Items | Income Statement Items (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenue | $358.1 | $295.4 | | Gross profit | $240.5 | $209.7 | | Operating income | $27.7 | $37.9 | | Net income | $23.8 | $27.8 | | Diluted EPS | $0.34 | $0.40 | Condensed Consolidated Statements of Cash Flows Q1 2023 saw $0.5 million net cash from operations, $42.1 million used in investing, and a $53.8 million net decrease in cash Cash Flow Summary | Cash Flow Summary (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $0.5 | $(13.7) | | Net cash used in investing activities | $(42.1) | $(46.9) | | Net cash used in financing activities | $(12.1) | $(20.3) | | Net decrease in cash | $(53.8) | $(81.5) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, with U.S. Omnipod revenue at $259.0 million, a $25.1 million patent acquisition, and an $8.0 million liability revision Revenue by Segment | Revenue by Segment (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | U.S. Omnipod | $259.0 | $174.1 | | International Omnipod | $98.6 | $95.4 | | Drug Delivery | $0.5 | $25.9 | | Total revenue | $358.1 | $295.4 | - In February 2023, the company acquired patent assets related to pump-based automated insulin delivery technologies from Bigfoot Biomedical, Inc. for $25.1 million[40] - The company revised its estimated liability for the Omnipod DASH and Omnipod 5 voluntary medical device corrections by $8.0 million, primarily due to lower anticipated shipping and distribution costs for replacements[42] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 21.2% revenue growth driven by Omnipod 5, a gross margin decline to 67.2%, and strategic plans for international expansion and manufacturing capacity Overview The company focuses on the Omnipod System, planning Omnipod 5 international launches, type 2 diabetes expansion, and a new Malaysian manufacturing facility by 2024 - The company plans to launch Omnipod 5 in the U.K. and Germany in 2023, with a broader international rollout in 2024[60] - A new manufacturing plant is being constructed in Malaysia, with production expected to begin in 2024 to support international expansion and improve gross margins over time[62] - In April 2023, the company received FDA clearance for Omnipod GO™, a basal-only Pod for individuals with type 2 diabetes, with commercialization planned for 2024[63] Results of Operations Q1 2023 total revenue grew 21.2% to $358.1 million, driven by U.S. Omnipod, while gross margin declined to 67.2% due to higher costs Revenue Growth (YoY) | Revenue Growth (YoY) | Q1 2023 vs Q1 2022 | | :--- | :--- | | Total Revenue Growth | 21.2% | | Constant Currency Growth | 23.3% | | U.S. Omnipod Growth | 48.8% | | International Omnipod Growth | 3.4% (9.6% constant currency) | | Drug Delivery Growth | (98.1)% | - Gross margin decreased to 67.2% from 71.0% in Q1 2022, primarily due to higher costs for Omnipod 5 production, increased U.S. manufacturing, and lower Drug Delivery production, partially offset by a 220 basis point positive adjustment to the warranty accrual for prior MDCs[76] - Selling, general and administrative (SG&A) expenses increased by 26.4% to $162.7 million, driven by higher customer service costs for Omnipod 5, increased headcount, and investments in new systems[79] Liquidity and Capital Resources Q1 2023 ended with $620.7 million in cash, $1,396.6 million in net debt, and $0.5 million net cash from operations, with sufficient liquidity Financial Position | Financial Position (in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $620.7 | $674.7 | | Total debt, net | $1,396.6 | $1,401.8 | | Total stockholders' equity | $502.8 | $476.4 | - In May 2023, the Company entered into a $24.0 million financing transaction for manufacturing equipment in Acton, Massachusetts[57][92] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the 2022 Annual Report on Form 10-K for detailed disclosures on market risks, providing no new information - The company refers to its 2022 Annual Report on Form 10-K for discussion of its market price sensitive instruments and foreign currency exchange risk[111] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[113] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[114] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings but does not expect their outcomes to materially adversely affect its results of operations - The company does not expect the outcome of its various legal proceedings, either individually or in the aggregate, to have a material adverse effect on its results of operations[50] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K were reported - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[116] Other Items (Items 2, 3, 4, 5) The company reported no unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, or other material information for the quarter - The company reported no unregistered sales of equity securities, defaults upon senior securities, or other material information for the quarter[117][118][120] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL formatted financial data - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and iXBRL formatted financial statements[121]