Insulet Reports Second Quarter 2014 Results

Insulet Reports Second Quarter 2014 Results 
Company Achieves Record Revenue and Gross Profit 
BEDFORD, MA -- (Marketwired) -- 08/07/14 --  Insulet Corporation
(NASDAQ: PODD), the leader in tubeless insulin pump technology with
its OmniPod(R) Insulin Management System, today announced financial
results for the three and six months ended June 30, 2014.  
Second Quarter Results 
Second quarter 2014 revenue increased 20% to $72.0 million, compared
to $60.1 million in the second quarter of 2013. Gross profit for the
second quarter of 2014 rose 33% to $35.8 million from $26.8 million
for the second quarter of 2013. The Company reached 50% gross margin
for the second quarter of 2014, compared to 45% for the second
quarter of 2013. 
"We made significant progress across all aspects of the business in
the second quarter. Revenue increased by 35% within the OmniPod
business and 20% overall," said Duane DeSisto, President and Chief
Executive Officer of Insulet. "We achieved a 50% gross margin for the
first time and excluding the impact of the patent settlement, we
generated nearly $2 million of operating profit. I remain confident
and excited about a strong second half of the year as we begin to see
the return of investment in our new commercial team members, continue
to see additional gross margin expansion and remain operating
profitable." 
Operating expenses were $41.0 million in the second quarter of 2014
compared to $32.7 million in the second quarter of 2013. During the
second quarter, the Company settled patent infringement litigation
with Becton, Dickinson and Company resulting in one-time settlement
and legal costs totaling approximately $7 million. Operating loss for
the second quarter of 2014 was $5.3 million, compared to an operating
loss of $5.8 million in the second quarter of 2013, an improvement of
9%. Excluding the impact of the settlement and legal costs, the
Company would have reported an operating profit of $1.7 million in
the quarter.  
Interest and other expense was $23.8 million in the second quarter of
2014 compared to $4.6 million in the second quarter of 2013. The
increase in interest and other expense is due to the loss from the
extinguishment of debt recorded in June 2014. The Company sold
approximately $201.3 million in principal amount of 2% Senio
r
Convertible Notes due June 2019 and concurrently repurchased $114.9
million in principal amount of 3.75% Senior Convertible Notes due
June 2016 for a cash payment of approximately $160.7 million. The
Company recorded an $18.9 million loss from the extinguishment of
debt in the second quarter of 2014 in connection with the repurchase
of its 3.75% Notes. The remaining $28.8 million of 3.75% Senior
Convertible Notes were subsequently called on June 17, 2014 and
retired on July 28, 2014 for $28.8 million in cash and approximately
348,000 shares of common stock.  
Net loss for the second quarter of 2014 was $29.1 million, or $0.53
per share, compared to a net loss of $10.5 million, or $0.20 per
share, for the second quarter of 2013. Excluding the impact of the
extinguishment of debt and the settlement and legal costs, the
Company's net loss was $3.2 million or approximately $0.06 per share. 
For the six months ended June 30, 2014, revenue increased 20% to
$141.2 million from $117.4 million for the first six months of 2013.
Gross profit for the first six months of 2014 was $68.6 million, as
compared to a gross profit of $52.0 million in the first six months
of 2013. Operating loss for the six months ended June 30, 2014 was
$7.2 million, as compared to an operating loss of $12.0 million in
the six months ended June 30, 2013. Net loss for the first six months
of 2014 was $35.3 million, or $0.64 per share, compared to $21.2
million, or $0.40 per share, for the first six months of 2013.  
As of June 30, 2014, the Company had cash and cash equivalents of
$175.5 million compared to $149.7 million at December 31, 2013. 
Guidance
 For the year ending December 31, 2014, the Company updated
its estimate of revenue to be in the range of $290 to $300 million.
The Company adjusted the midpoint of 2014 guidance down approximately
3%, reflecting a payor issue that is delaying new patient starts due
to changes in the payor's general pump reimbursement policies. For
the third quarter of 2014, the Company expects that revenue will be
in the range of $73 to $77 million.  
Conference Call
 Insulet will host a conference call on Thursday,
August 7, 2014 at 5:00PM Eastern time to discuss the Company's second
quarter 2014 results and present information concerning its business,
strategies and outlook. To listen to the conference call, please dial
(844) 831-3022 for domestic callers and (315) 625-6887 for
international callers. The passcode is 81289258. A replay of the
conference call will be available two hours after the start of the
call through August 21, 2014 by dialing (855) 859-2056 (domestic) or
(404) 537-3406 (international), passcode 81289258. An online archive
of the conference call will also be available by accessing the
Investor Information section of the Company's website at
http://investors.insulet.com.  
About Insulet Corporation 
 Insulet Corporation (NASDAQ: PODD) is an
innovative medical device company dedicated to making the lives of
people with diabetes easier. Through its OmniPod Insulin Management
System, Insulet seeks to expand the use of insulin pump therapy among
people with insulin-dependent diabetes. The OmniPod is a
revolutionary and easy-to-use tubeless insulin pump that features
just two parts and fully-automated cannula insertion. Insulet's
subsidiary, Neighborhood Diabetes, is a leading distributor for
diabetes products and supplies, delivered through a high touch
customer service model. To read inspiring stories of people with
diabetes living their lives to the fullest with OmniPod, visit our
customer blog, Suite D: http://suited.myomnipod.com. Founded in 2000,
Insulet Corporation is based in Bedford, Mass. For more information,
please visit: http://www.myomnipod.com.   
Forward-Looking Statement
 The 2014 financial results contained in
this news release are subject to finalization in connection with the
preparation of the Company's Quarterly Report on Form 10-Q for the
three and six months ended June 30, 2014. This press release contains
forward-looking statements concerning Insulet's expectations,
anticipations, intentions, beliefs or strategies regarding the
future, including those related to its estimated revenue and
operating profitability. These forward-looking statements are based
on its current expectations and beliefs concerning future
developments and their potential effects on Insulet. There can be no
assurance that future developments affecting Insulet will be those
that it has anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond its control)
or other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include,
but are not limited to: risks associated with the Company's
dependence on its principal product, the OmniPod System; Insulet's
ability to reduce production costs and increase customer orders and
manufacturing volumes; adverse changes in general economic
conditions; impact of healthcare reform laws; Insulet's ability to
raise additional funds in the future on acceptable terms or at all;
potential supply problems or price fluctuations with sole source or
third-par
ty suppliers on which Insulet is dependent; the potential
establishment of a competitive bid program for conventional insulin
pumps; failure by Insulet to retain supplier pricing discounts and
achieve satisfactory gross margins; failure by Insulet to retain key
supplier and payor partners; international business risks; Insulet's
inability to secure and retain adequate coverage or reimbursement
from third-party payors for the OmniPod System and potential adverse
changes in reimbursement rates or policies relating to the OmniPod
System; failure to retain key payor partners and their members;
failure to retain and manage successfully Neighborhood Diabetes'
Medicare and Medicaid business; potential adverse effects resulting
from competition with competitors; technological change and product
innovation adversely affecting the Company's business; potential
termination of Insulet's license to incorporate a blood glucose meter
into the OmniPod System or its inability to enter into new license
agreements; Insulet's ability to protect its intellectual property
and other proprietary rights; conflicts with the intellectual
property of third parties, including claims that Insulet's current or
future products infringe or misappropriate the proprietary rights of
others; adverse regulatory or legal actions relating to the OmniPod
System; failure of Insulet's contract manufacturers or component
suppliers to comply with FDA's quality system regulations, the
potential violation of federal or state laws prohibiting "kickbacks"
or protecting the confidentiality of patient health information, or
any challenge to or investigation into Insulet's practices under
these laws; product liability lawsuits that may be brought against
Insulet; reduced retention rates of our customer base; unfavorable
results of clinical studies relating to the OmniPod System or the
products of Insulet's competitors; potential future publication of
articles or announcement of positions by diabetes associations or
other organizations that are unfavorable to the OmniPod System; the
concentration of substantially all of Insulet's operations at a
single location in China and substantially all of Insulet's inventory
at a single location in Massachusetts; Insulet's ability to attract
and retain personnel; Insulet's ability to manage its growth;
fluctuations in quarterly results of operations; risks associated
with potential future acquisitions or investments in new businesses;
Insulet's ability to generate sufficient cash to service all of its
indebtedness; the expansion of Insulet's distribution network;
Insulet's ability to successfully maintain effective internal control
over financial reporting; the volatility of Insulet's common stock;
risks related to future sales of its common stock or the conversion
of any of the 2% Convertible Senior Notes due June 15, 2019;
potential limitations on Insulet's ability to use its net operating
loss carryforwards; anti-takeover provisions in its organizational
documents; and other risks and uncertainties described in its Annual
Report on Form 10-K, which was filed with the Securities and Exchange
Commission on February 28, 2014 in the section entitled "Risk
Factors," and in its other filings from time to time with the
Securities and Exchange Commission. Should one or more of these risks
or uncertainties materialize, or should any of its assumptions prove
incorrect, actual results may vary in material respects from those
projected in these forward-looking statements. Insulet undertakes no
obligation to publicly update or revise any forward-looking
statements. 


 
                                                                            
                                                                            
                            INSULET CORPORATION                             
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                                                                            
                            Three Months Ended         Six Months Ended     
                                 June 30,                  June 30,         
                         ------------------------  ------------------------ 
                                                                            
                             2014         2013         2014         2013    
                         -----------  -----------  -----------  ----------- 
                                             (Unaudited)                    
                           (In thousands, except share and per share data)  
                                                                            
Revenue                  $    72,013  $    60,092  $   141,174  $   117,448 
Cost of revenue               36,248       33,259       72,601       65,460 
                         -----------  -----------  -----------  ----------- 
Gross profit                  35,765       26,833       68,573       51,988 
Operating expenses:                                                         
  Research and                                                              
   development                 6,677        5,174       13,456        9,570 
  General and                                                               
   administrative             19,512       13,901       33,771       26,995 
  Sales and marketing         14,856       13,580       28,512       27,451 
                         -----------  -----------  -----------  ----------- 
    Total operating                                                         
     expenses                 41,045       32,655       75,739       64,016 
                         -----------  -----------  -----------  ----------- 
Operating loss                (5,280)      (5,822)      (7,166)     (12,028)
Interest and other                                                          
 expense, net                (23,779)      (4,579)     (27,972)      (8,907)
                         -----------  -----------  -----------  ----------- 
Loss before income taxes     (29,059)     (10,401)     (35,138)     (20,935)
Income tax expense               (52)        (118)        (117)        (249)
                         -----------  -----------  -----------  ----------- 
Net loss                 $   (29,111) $   (10,519) $   (35,255) $   (21,184)
                         ===========  ===========  ===========  =========== 
Net loss per share basic                                                    
 and diluted             $     (0.53) $     (0.20) $     (0.64) $     (0.40)
                         ===========  ===========  ===========  =========== 
                                                                            
Weighted-average number                                                     
 of shares used in                                                          
 calculating net loss                                                       
 per share                55,425,949   53,834,707   55,258,419   53,445,715 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                          
  INSULET CORPORATION                             
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                                                                            
                                                     As of         As of    
                                                   June 30,    December 31, 
                                                     2014          2013     
                                                 ------------  ------------ 
                                                         (Unaudited)        
                                                    (In thousands, except   
                                                  share and per share data) 
ASSETS                                                                      
Current Assets                                                              
Cash and cash equivalents                        $    175,545  $    149,727 
Accounts receivable, net                               41,797        33,067 
Inventories                                             8,765         9,464 
Prepaid expenses and other current assets               5,725         5,940 
                                                 ------------  ------------ 
    Total current assets                              231,832       198,198 
Property and equipment, net                            34,159        32,356 
Intangible assets, net                                 15,882        18,040 
Goodwill                                               37,536        37,536 
Other assets                                            5,919         1,825 
                                                 ------------  ------------ 
    Total assets                                 $    325,328  $    287,955 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current Liabilities                                                         
Accounts payable                                 $     18,610  $     19,359 
Accrued expenses and other current liabilities         24,588        19,478 
Deferred revenue                                        1,255           900 
Current portion of capital lease obligations            2,872         2,637 
Current portion of long-term debt                      23,874             - 
                                                 ------------  ------------ 
    Total current liabilities                          71,199        42,374 
Capital lease obligations                               3,893         5,390 
Long-term debt                                        165,870       113,651 
Other long-term liabilities                             1,521         1,943 
                                                 ------------  ------------ 
    Total liabilities                                 242,483       163,358 
Redeemable convertible debt                             4,961             - 
Stockholders' Equity                                                        
Preferred stock, $.001 par value:                                           
  Authorized: 5,000,000 shares at June 30, 2014                             
   and December 31, 2013. Issued and                                        
   outstanding: zero shares at June 30, 2014 and                            
   December 31, 2013.                                       -             - 
Common stock, $.001 par value:                                              
  Authorized: 100,000,000 shares at June 30,                                
   2014 and December 31, 2013. Issued and                                   
   outstanding: 55,495,352 and 54,870,424 shares                            
   at June 30, 2014 and December 31, 2013,                                  
   respectively.                                           55            55 
Additional paid-in capital                            639,609       651,067 
Accumulated deficit                                  (561,780)     (526,525)
                                                 ------------  ------------ 
    Total stockholders' equity                         77,884       124,597 
                                                 ------------  ------------ 
    Total liabilities, redeemable convertible                               
     debt and stockholders' equity               $    325,328  $    287,955 
                                                 ============  ============ 

  
Investor Relations Contact:
Insulet Corporation 
ir@insulet.com
877-PODD-IR1 (877-763-3471) 
 
 
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