UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

_____________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33462

INSULET CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

04-3523891

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

100 Nagog Park

Acton

Massachusetts

01720

(Address of Principal Executive Offices)

(Zip Code)

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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value Per Share	PODD	The NASDAQ Stock Market, LLC

As of October ~~27, 2022,~~26, 2023, the registrant had ~~69,448,703~~69,827,619 shares of common stock outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements			3
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022			3
Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022			4
Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~ (Unaudited) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022			5
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022			6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022			8
Notes to Condensed Consolidated Financial Statements (Unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			27

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Mine Safety Disclosures			28
Item 5. Other Information			28
Item 6. Exhibits			28
Signatures			29

Table of Contents

PART I - FINANCIAL INFORMATION


Item 1.			Condensed Consolidated Financial Statements (Unaudited)

INSULET CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions, except share and per share data)	(in millions, except share and per share data)	September 30, 2022		December 31, 2021		(in millions, except share and per share data)	September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	722.0	$	791.6	Cash and cash equivalents	$	685.4	$	674.7
Accounts receivable trade, less allowance for credit losses of $2.9 and $2.7		153.1		135.2
Accounts receivable trade, less allowance for credit losses of $2.5 and $2.5						Accounts receivable trade, less allowance for credit losses of $2.5 and $2.5	190.4		140.9
Accounts receivable trade, net — related party	Accounts receivable trade, net — related party	48.3		25.8		Accounts receivable trade, net — related party	79.9		64.7
Inventories	Inventories	327.6		303.2		Inventories	410.8		346.8
Prepaid expenses and other current assets	Prepaid expenses and other current assets	78.1		74.0		Prepaid expenses and other current assets	104.6		86.9
Total current assets	Total current assets	1,329.1		1,329.8		Total current assets	1,471.1		1,314.0
Property, plant and equipment, net	Property, plant and equipment, net	553.1		536.5		Property, plant and equipment, net	649.2		599.9
Other intangible assets, net	Other intangible assets, net	53.7		36.6		Other intangible assets, net	99.5		75.5
Goodwill	Goodwill	51.6		39.8		Goodwill	51.7		51.7
Other assets	Other assets	178.7		106.1		Other assets	196.2		210.0
Total assets	Total assets	$	2,166.2	$	2,048.8	Total assets	$	2,467.7	$	2,251.1
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	62.1	$	37.7	Accounts payable	$	77.8	$	30.8
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	241.7		164.3		Accrued expenses and other current liabilities	319.2		301.0
Accrued expenses and other current liabilities — related party	Accrued expenses and other current liabilities — related party	3.5		1.7		Accrued expenses and other current liabilities — related party	4.6		5.4
Current portion of long-term debt	Current portion of long-term debt	26.9		25.1		Current portion of long-term debt	49.8		27.5
Total current liabilities	Total current liabilities	334.2		228.8		Total current liabilities	451.4		364.7
Long-term debt, net	Long-term debt, net	1,379.8		1,248.8		Long-term debt, net	1,370.6		1,374.3
Other liabilities	Other liabilities	24.2		14.9		Other liabilities	38.2		35.7
Total liabilities	Total liabilities	1,738.2		1,492.5		Total liabilities	1,860.2		1,774.7
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)					Commitments and contingencies (Note 12)
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding	Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding	—		—		Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding	—		—
Common stock, $.001 par value, 100,000,000 authorized; 69,431,159 and 69,178,691 issued and outstanding		0.1		0.1
Common stock, $.001 par value, 100,000,000 authorized; 69,825,875 and 69,511,286 issued and outstanding						Common stock, $.001 par value, 100,000,000 authorized; 69,825,875 and 69,511,286 issued and outstanding	0.1		0.1
Additional paid-in capital	Additional paid-in capital	1,022.4		1,207.9		Additional paid-in capital	1,081.1		1,040.6
Accumulated deficit	Accumulated deficit	(601.3)		(649.5)		Accumulated deficit	(481.3)		(584.3)
Accumulated other comprehensive income (loss)		6.8		(2.2)
Accumulated other comprehensive income						Accumulated other comprehensive income	7.6		20.0
Total stockholders’ equity	Total stockholders’ equity	428.0		556.3		Total stockholders’ equity	607.5		476.4
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,166.2	$	2,048.8	Total liabilities and stockholders’ equity	$	2,467.7	$	2,251.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INSULET CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except share and per share data)	(in millions, except share and per share data)	2022		2021		2022		2021		(in millions, except share and per share data)	2023		2022		2023		2022
Revenue	Revenue	$	281.9	$	261.8	$	772.8	$	771.8	Revenue	$	320.7	$	281.9	$	869.3	$	772.8
Revenue from related party	Revenue from related party	58.9		13.8		162.8		19.3		Revenue from related party	112.0		58.9		318.0		162.8
Total revenue	Total revenue	340.8		275.6		935.6		791.1		Total revenue	432.7		340.8		1,187.3		935.6
Cost of revenue	Cost of revenue	152.5		86.9		347.3		252.2		Cost of revenue	139.4		152.5		388.6		347.3
Gross profit	Gross profit	188.3		188.7		588.3		538.9		Gross profit	293.3		188.3		798.7		588.3
Research and development expenses	Research and development expenses	45.0		37.5		130.7		118.3		Research and development expenses	57.8		45.0		163.0		130.7
Selling, general and administrative expenses	Selling, general and administrative expenses	140.4		117.5		443.5		344.3		Selling, general and administrative expenses	180.7		140.4		522.1		443.5
Operating income	Operating income	2.9		33.7		14.1		76.3		Operating income	54.8		2.9		113.6		14.1
Interest expense, net		(6.8)		(16.3)		(24.0)		(46.1)
Loss on extinguishment of debt		—		(1.5)		—		(41.6)
Other expense, net		(1.8)		(0.7)		(2.6)		(1.5)
(Loss) income before income taxes		(5.7)		15.2		(12.5)		(12.9)
Income tax benefit (expense)		0.5		(2.6)		0.1		0.5
Net (loss) income		$	(5.2)	$	12.6	$	(12.4)	$	(12.4)
Interest expense										Interest expense	(10.4)		(9.2)		(29.5)		(27.3)
Interest income										Interest income	8.6		2.4		22.4		3.3
Other income (expense), net										Other income (expense), net	0.7		(1.8)		0.3		(2.6)
Income (loss) before income taxes										Income (loss) before income taxes	53.7		(5.7)		106.8		(12.5)
Income tax (expense) benefit										Income tax (expense) benefit	(1.8)		0.5		(3.8)		0.1
Net income (loss)										Net income (loss)	$	51.9	$	(5.2)	$	103.0	$	(12.4)

Net (loss) income per share:
Net income (loss) per share:										Net income (loss) per share:
Basic	Basic	$	(0.08)	$	0.18	$	(0.18)	$	(0.18)	Basic	$	0.74	$	(0.08)	$	1.48	$	(0.18)
Diluted	Diluted	$	(0.08)	$	0.18	$	(0.18)	$	(0.18)	Diluted	$	0.74	$	(0.08)	$	1.47	$	(0.18)
Weighted-average number of common shares outstanding (in thousands):	Weighted-average number of common shares outstanding (in thousands):									Weighted-average number of common shares outstanding (in thousands):
Basic	Basic	69,418		68,869		69,343		67,236		Basic	69,823		69,418		69,715		69,343
Diluted	Diluted	69,418		69,619		69,343		67,236		Diluted	73,624		69,418		70,111		69,343

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INSULET CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2022 2021 2022 2021
Net (loss) income $ (5.2) $ 12.6 $ (12.4) $ (12.4)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (11.6) (4.4) (24.9) (8.3)
Unrealized gain (loss) on cash flow hedges 11.2 0.3 33.9 (0.3)
Unrealized loss on available-for-sale securities — — — (0.3)
Total other comprehensive (loss) income, net of tax (0.4) (4.1) 9.0 (8.9)
Comprehensive (loss) income $ (5.6) $ 8.5 $ (3.4) $ (21.3)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Net income (loss)	$	51.9	$	(5.2)	$	103.0	$	(12.4)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(6.1)		(11.6)		(6.8)		(24.9)
Unrealized (loss) gain on cash flow hedges	(2.6)		11.2		(5.6)		33.9
Total other comprehensive income (loss), net of tax	(8.7)		(0.4)		(12.4)		9.0
Comprehensive income (loss)	$	43.2	$	(5.6)	$	90.6	$	(3.4)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INSULET CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Three Months Ended September 30, ~~2022~~2023


		Common Stock			Additional Paid-in Capital					Accumulated Deficit			Accumulated Other Comprehensive Income			Total Shareholders’ Equity			Common Stock				Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
(dollars in millions)	(dollars in millions)	Shares (in thousands)	Amount				(dollars in millions)		Shares (in thousands)											Amount
Balance at June 30, 2022		69,386	$	0.1			$	1,011.2				$	(596.1)		$	7.2			$	422.4
Balance at June 30, 2023																		Balance at June 30, 2023	69,804		$	0.1	$	1,070.7	$	(533.2)	$	16.3	$	553.9
Exercise of options to purchase common stock	Exercise of options to purchase common stock	43	—		2.4					—			—			2.4		Exercise of options to purchase common stock	19		—		0.1		—		—		0.1
Stock-based compensation expense	Stock-based compensation expense	—	—		9.0					—			—			9.0		Stock-based compensation expense	—		—		10.5		—		—		10.5
Restricted stock units vested, net of shares withheld for taxes	Restricted stock units vested, net of shares withheld for taxes	2	—		(0.2)					—			—			(0.2)		Restricted stock units vested, net of shares withheld for taxes	3		—		(0.2)		—		—		(0.2)
Net loss		—	—		—					(5.2)			—			(5.2)
Net income																		Net income	—		—		—		51.9		—		51.9
Other comprehensive loss	Other comprehensive loss	—	—		—					—			(0.4)			(0.4)		Other comprehensive loss	—		—		—		—		(8.7)		(8.7)
Balance at September 30, 2022		69,431	$	0.1	$	1,022.4				$	(601.3)		$	6.8		$	428.0
Balance at September 30, 2023																		Balance at September 30, 2023	69,826		$	0.1	$	1,081.1	$	(481.3)	$	7.6	$	607.5

Three Months Ended September 30, ~~2021~~2022


		Common Stock			Additional Paid-in Capital					Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Common Stock				Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
(dollars in millions)	(dollars in millions)	Shares (in thousands)	Amount				(dollars in millions)		Shares (in thousands)											Amount
Balance at June 30, 2021		68,610	$	0.1			$	1,149.6				$	(691.3)		$	0.7			$	459.1
Balance at June 30, 2022																		Balance at June 30, 2022	69,386		$	0.1	$	1,011.2	$	(596.1)	$	7.2	$	422.4
Exercise of options to purchase common stock	Exercise of options to purchase common stock	95	—		4.3					—			—			4.3		Exercise of options to purchase common stock	43		—		2.4		—		—		2.4
Stock-based compensation expense	Stock-based compensation expense	—	—		8.2					—			—			8.2		Stock-based compensation expense	—		—		9.0		—		—		9.0
Restricted stock units vested, net of shares withheld for taxes	Restricted stock units vested, net of shares withheld for taxes	2	—		(0.2)					—			—			(0.2)		Restricted stock units vested, net of shares withheld for taxes	2		—		(0.2)		—		—		(0.2)
Extinguishment of conversion feature on 1.375% Notes, net of issuance costs		—	—		(41.7)					—			—			(41.7)
Issuance of shares for debt extinguishment		215	—		59.7					—			—			59.7
Net income		—	—		—					12.6			—			12.6
Net loss																		Net loss	—		—		—		(5.2)		—		(5.2)
Other comprehensive loss	Other comprehensive loss	—	—		—					—			(4.1)			(4.1)		Other comprehensive loss	—		—		—		—		(0.4)		(0.4)
Balance at September 30, 2021		68,922	$	0.1	$	1,179.9				$	(678.7)		$	(3.4)		$	497.9
Balance at September 30, 2022																		Balance at September 30, 2022	69,431		$	0.1	$	1,022.4	$	(601.3)	$	6.8	$	428.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Nine Months Ended September 30, ~~2022~~
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated Other Comprehensive (Loss) Income Total
Shareholders’
Equity
(dollars in millions) Shares
(in thousands) Amount
Balance at December 31, 2021 69,179 $ 0.1 $ 1,207.9 $ (649.5) $ (2.2) $ 556.3
Adoption of ASU 2020-06 (Note 1) — — (207.7) 60.6 — (147.1)
Exercise of options to purchase common stock 95 — 4.3 — — 4.3
Issuance of shares for employee stock purchase plan 27 — 4.9 — — 4.9
Stock-based compensation expense — — 29.7 — — 29.7
Restricted stock units vested, net of shares withheld for taxes 130 — (16.7) — — (16.7)
Net loss — — — (12.4) — (12.4)
Other comprehensive income — — — — 9.0 9.0
Balance at September 30, 2022 69,431 $ 0.1 $ 1,022.4 $ (601.3) $ 6.8 $ 428.0
2023


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
(dollars in millions)	Shares (in thousands)	Amount
Balance at December 31, 2022	69,511	$	0.1	$	1,040.6	$	(584.3)	$	20.0	$	476.4
Exercise of options to purchase common stock	202	—		12.4		—		—		12.4
Issuance of shares for employee stock purchase plan	23	—		5.5		—		—		5.5
Stock-based compensation expense	—	—		35.7		—		—		35.7
Restricted stock units vested, net of shares withheld for taxes	90	—		(13.1)		—		—		(13.1)
Net income	—	—		—		103.0		—		103.0
Other comprehensive loss	—	—		—		—		(12.4)		(12.4)
Balance at September 30, 2023	69,826	$	0.1	$	1,081.1	$	(481.3)	$	7.6	$	607.5

Nine Months Ended September 30, ~~2021~~2022


		Common Stock			Additional Paid-in Capital					Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Common Stock				Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Shareholders’ Equity
(dollars in millions)	(dollars in millions)	Shares (in thousands)	Amount				(dollars in millions)		Shares (in thousands)											Amount
Balance at December 31, 2020		66,017	$	0.1			$	1,264.3				$	(666.3)		$	5.5			$	603.6
Balance at December 31, 2021																		Balance at December 31, 2021	69,179		$	0.1	$	1,207.9	$	(649.5)	$	(2.2)	$	556.3
Adoption of ASU 2020-06 (1)																		Adoption of ASU 2020-06 (1)	—		—		(207.7)		60.6				(147.1)
Exercise of options to purchase common stock	Exercise of options to purchase common stock	259	—		10.5					—			—			10.5		Exercise of options to purchase common stock	95		—		4.3		—		—		4.3
Issuance of shares for employee stock purchase plan	Issuance of shares for employee stock purchase plan	17	—		3.9					—			—			3.9		Issuance of shares for employee stock purchase plan	27		—		4.9		—		—		4.9
Stock-based compensation expense	Stock-based compensation expense	—	—		25.8					—			—			25.8		Stock-based compensation expense	—		—		29.7		—		—		29.7
Restricted stock units vested, net of shares withheld for taxes	Restricted stock units vested, net of shares withheld for taxes	172	—		(27.6)					—			—			(27.6)		Restricted stock units vested, net of shares withheld for taxes	130		—		(16.7)		—		—		(16.7)
Extinguishment of conversion feature on 1.375% Notes, net of issuance costs		—	—		(779.4)					—			—			(779.4)
Issuance of shares for debt extinguishment		2,457	—		682.4					—			—			682.4
Net loss	Net loss	—	—		—					(12.4)			—			(12.4)		Net loss	—		—		—		(12.4)		—		(12.4)
Other comprehensive loss		—	—		—					—			(8.9)			(8.9)
Balance at September 30, 2021		68,922	$	0.1	$	1,179.9				$	(678.7)		$	(3.4)		$	497.9
Other comprehensive income																		Other comprehensive income	—		—		—		—		9.0		9.0
Balance at September 30, 2022																		Balance at September 30, 2022	69,431		$	0.1	$	1,022.4	$	(601.3)	$	6.8	$	428.0

(1) The Company recorded a cumulative effect adjustment to additional paid-in capital and retained earnings to reflect the adoption of Accounting Standards Update 2020-06, Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Refer to Note 2 of Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INSULET CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		(in millions)	2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net loss		$	(12.4)	$	(12.4)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss)						Net income (loss)	$	103.0	$	(12.4)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	47.0		42.5		Depreciation and amortization	54.0		47.0
Stock-based compensation expense	Stock-based compensation expense	29.7		25.8		Stock-based compensation expense	35.7		29.7
Non-cash interest expense	Non-cash interest expense	4.3		31.9		Non-cash interest expense	4.6		4.3
Loss on extinguishment of debt		—		41.6
Provision for credit losses	Provision for credit losses	3.1		2.8		Provision for credit losses	2.1		3.1
Other	Other	1.1		0.2		Other	(0.2)		1.1
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(28.3)		(25.9)		Accounts receivable	(52.1)		(28.3)
Accounts receivable — related party	Accounts receivable — related party	(22.5)		(14.1)		Accounts receivable — related party	(15.2)		(22.5)
Inventories	Inventories	(34.5)		(108.1)		Inventories	(65.3)		(34.5)
Prepaid expenses and other assets	Prepaid expenses and other assets	(32.1)		(28.2)		Prepaid expenses and other assets	(24.5)		(32.1)
Accounts payable	Accounts payable	23.3		6.0		Accounts payable	41.5		23.3
Accrued expenses and other liabilities	Accrued expenses and other liabilities	87.8		(5.6)		Accrued expenses and other liabilities	16.2		87.8
Accrued expenses and other liabilities — related party	Accrued expenses and other liabilities — related party	1.8		0.9		Accrued expenses and other liabilities — related party	0.7		1.8
Net cash provided by (used in) operating activities		68.3		(42.6)
Net cash provided by operating activities						Net cash provided by operating activities	100.5		68.3
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Capital expenditures	Capital expenditures	(58.5)		(80.1)		Capital expenditures	(46.3)		(58.5)
Investments in developed software						Investments in developed software	(6.2)		(10.4)
Acquisition of intangible assets	Acquisition of intangible assets	(10.4)		(5.7)		Acquisition of intangible assets	(25.1)		—
Acquisition		(26.0)		—
Acquisition of a business						Acquisition of a business	(3.0)		(26.0)
Cash paid for investments	Cash paid for investments	(7.8)		—		Cash paid for investments	(7.2)		(7.8)
Receipts from the maturity or sale of marketable securities		—		39.5
Net cash used in investing activities	Net cash used in investing activities	(102.7)		(46.3)		Net cash used in investing activities	(87.8)		(102.7)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from issuance of convertible debt, net of issuance costs		—		489.5
Repayment of convertible debt		—		(460.8)
Proceeds from equipment financing, net		—		43.1
Repayment of equipment financings	Repayment of equipment financings	(13.0)		(9.6)		Repayment of equipment financings	(14.8)		(13.0)
Repayment of term loan						Repayment of term loan	(3.8)		(3.7)
Repayment of mortgage	Repayment of mortgage	(1.6)		(1.5)		Repayment of mortgage	(1.7)		(1.6)
Repayment of term loan		(3.7)		(1.3)
Payment of debt issuance costs		—		(4.0)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	4.3		10.5		Proceeds from exercise of stock options	12.4		4.3
Proceeds from issuance of common stock under employee stock purchase plan	Proceeds from issuance of common stock under employee stock purchase plan	4.9		3.9		Proceeds from issuance of common stock under employee stock purchase plan	5.5		4.9
Payment of withholding taxes in connection with vesting of restricted stock units	Payment of withholding taxes in connection with vesting of restricted stock units	(16.7)		(27.6)		Payment of withholding taxes in connection with vesting of restricted stock units	(13.1)		(16.7)
Net cash (used in) provided by financing activities		(25.8)		42.2
Other						Other	(0.3)		—
Net cash used in financing activities						Net cash used in financing activities	(15.8)		(25.8)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(9.1)		(3.9)		Effect of exchange rate changes on cash	(1.2)		(9.1)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(69.3)		(50.6)		Net decrease in cash, cash equivalents and restricted cash	(4.3)		(69.3)
Cash, cash equivalents and restricted cash at beginning of period (Note 3)	Cash, cash equivalents and restricted cash at beginning of period (Note 3)	806.4		922.0		Cash, cash equivalents and restricted cash at beginning of period (Note 3)	689.7		806.4
Cash, cash equivalents and restricted cash at end of period (Note 3)	Cash, cash equivalents and restricted cash at end of period (Note 3)	$	737.1	$	871.4	Cash, cash equivalents and restricted cash at end of period (Note 3)	$	685.4	$	737.1

Supplemental noncash information:	Supplemental noncash information:					Supplemental noncash information:
Purchases of property and equipment included in accounts payable and accrued expenses	Purchases of property and equipment included in accounts payable and accrued expenses	$	6.0	$	3.2	Purchases of property and equipment included in accounts payable and accrued expenses	$	7.8	$	6.0
Purchases of intangible assets included in accounts payable and accrued expenses		$	0.8	$	7.3
Lease liabilities arising from obtaining right-of-use assets		$	12.1	$	0.5
Purchases of property, plant and equipment included in long-term debt						Purchases of property, plant and equipment included in long-term debt	$	12.9	$	—
Purchases of developed software included in accounts payable and accrued expenses						Purchases of developed software included in accounts payable and accrued expenses	$	0.7	$	0.8
Operating lease liabilities arising from obtaining right-of-use assets						Operating lease liabilities arising from obtaining right-of-use assets	$	5.1	$	12.1
Finance lease liability arising from obtaining right-of-use assets						Finance lease liability arising from obtaining right-of-use assets	$	21.8	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INSULET CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements reflect the consolidated operations of Insulet Corporation and its subsidiaries (“Insulet” or the “Company”). The unaudited consolidated financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from those estimates. In management’s opinion, the unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the interim results reported. Operating results for the nine months ended September 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2022,~~2023, or for any other subsequent interim period.

The year-end balance sheet data was derived from audited consolidated financial statements. These unaudited consolidated financial statements do not include all of the annual disclosures required by GAAP; accordingly, they should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~Reclassification of Prior Period Amounts~~

~~Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. T~~he Company reclassified the change in unbilled receivables from the change in prepaid expenses and other current assets to the change in accounts receivable in the prior year statement of cash flows in the amount of $4.5 million. ~~There was no change to previously reported net cash used in operating activities.~~

~~Investments~~Related Party Transactions

The Company has ~~investments in privately-held companies in which~~a distribution agreement with a related party that contains terms consistent with those prevailing at arm’s length. The spouse of one of the members of the Company’s ~~interest~~Board of Directors is less than 20%, the Company does not exercise significant influence over the investee, and the investment does not have a readily determinable fair value. These investments are carried at cost less impairment, if any. If an ~~observable price change is identified, the investment is measured at its fair value as~~executive officer of the ~~date that the observable transaction occurred with the adjustments reflected in other (expense) income in the Company’s consolidated statements of operations.~~distributor.

Investments

In ~~January~~February and ~~May 2022,~~June 2023, the Company made strategic investments in two companies in the amount of ~~$5.0~~$2.0 million and ~~$2.8~~$5.0 million, respectively. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the total carrying value of the Company’s investments primarily recorded at cost less impairment was $16.7 million and $8.7 million, respectively.

Leases

The Company determines if an arrangement includes a lease at inception. Lease agreements generally have lease and ~~$0.9 million, respectively.~~non-lease components, which are accounted for separately. At lease commencement, the Company recognizes lease liabilities equal to the present value of the future lease payments and lease assets representing the right to use the underlying asset throughout the lease term. Certain leases may contain variable lease payments, including periodic payments that can be avoided by the Company. Variable payments that do not depend on an index or rate are excluded from the right-of-use asset and lease liability and are recognized as expenses in the period in which the obligation for those payments is incurred. Certain of the Company’s leases contain options to extend and/or terminate the lease, and/or to purchase the underlying asset. The Company assesses if it is reasonably certain to exercise options to extend the lease or if it is reasonably certain not to exercise options to terminate the lease to determine whether periods covered by those options should be included in the lease term when the Company measures the lease liability. The Company’s leases do not provide an implicit rate; accordingly, the Company uses an incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The Company’s incremental borrowing rate reflects a secured rate that considers the term of the lease, the nature of the underlying asset and the economic environment. The Company excludes leases with an expected term of one year or less from recognition on the consolidated balance sheet. Right-of-use assets are calculated as the initial measurement of the lease liability plus lease payments made prior to lease commencement and initial direct costs incurred, less lease incentives received.

Lease expense is recognized on a straight-line basis over the lease term. For finance leases, the right-of-use asset is amortized to amortization expense and interest expense is recorded in connection with the lease liability.

Shipping and Handling Costs

Shipping and handling costs included in selling, general and administrative expenses were ~~$3.5~~$3.7 million and ~~$2.8~~$3.5 million for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and were ~~$9.7~~$9.5 million and ~~$7.5~~$9.7 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. To measure fair value of assets and liabilities, the Company uses the following fair value hierarchy based on three levels of inputs:

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Level 1—observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2—significant other observable inputs that are observable either directly or indirectly; and

Level 3—significant unobservable inputs for which there are little or no market data, which require the Company to develop its own assumptions.

Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity. See Notes 3 and 10 for financial assets and liabilities held at carrying amount on the consolidated balance sheet and Note 11 for derivative instruments measured at fair value on a recurring basis.

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~~Recently Adopted Accounting Standard~~

~~Effective January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2020-06,~~ ~~Debt - Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity~~’~~s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity~~’~~s Own Equity~~ using the modified retrospective method for convertible debt instruments outstanding as of the date of adoption. Under ASU 2020-06, a convertible debt instrument is generally reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the effective interest rate of convertible debt instruments is closer to the coupon interest rate under the new guidance. The following table shows the adjustments made to the consolidated balance sheet as of January 1, 2022 as a result of adopting the new guidance.

(in millions) As Reported
Prior to ASU 2020-06 Adjustments As Adjusted
Under ASU 2020-06
December 31, 2021 January 1, 2022 January 1, 2022
Long-term debt, net (1)
$ 1,248.8 $ 147.1 $ 1,395.9
Additional paid-in-capital (2)
$ 1,207.9 $ (207.7) $ 1,000.2
Accumulated deficit (3)
$ (649.5) $ 60.6 $ (588.9)

~~(1)~~ ~~The increase in debt resulted from the derecognition of the discount associated with the embedded conversion feature, offset by the remaining debt issuance costs reclassified out of equity.~~

~~(2)~~ ~~The decrease in additional paid-in-capital resulted from the derecognition of the embedded conversion feature and debt issuance costs bifurcated to equity.~~

~~(3)~~ ~~The decrease to accumulated deficit represents the cumulative interest expense recognized related to the amortization of the bifurcated conversion option and debt issuance costs.~~

In addition to the adjustments in the table above, the Company wrote-off the related deferred tax liabilities with a corresponding adjustment to the valuation allowance, resulting in no net impact to the cumulative adjustment recorded to accumulated deficit. Adoption of this standard had no impact on the Company’s diluted earnings per share as the Company historically calculated earnings per share using the if-converted method.

Note 2. Revenue and Contract Acquisition Costs

The following table summarizes the Company’s disaggregated revenue:


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021			(in millions)	2023		2022		2023		2022
U.S. Omnipod	U.S. Omnipod	$	238.1	$	167.2	$	608.6	$	461.0		U.S. Omnipod	$	320.6	$	238.1	$	856.4	$	608.6
International Omnipod	International Omnipod	88.0		93.1		272.8		274.6			International Omnipod	101.4		88.0		303.7		272.8
Total Omnipod	Total Omnipod	326.1		260.3		881.4		735.6			Total Omnipod	422.0		326.1		1,160.1		881.4
Drug Delivery	Drug Delivery	14.7		15.3		54.2		55.5			Drug Delivery	10.7		14.7		27.2		54.2
Total revenue	Total revenue	$	340.8	$	275.6	$	935.6	$	791.1		Total revenue	$	432.7	$	340.8	$	1,187.3	$	935.6

The percentages of total revenue for customers that represent 10% or more of total revenue were as follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Distributor A	Distributor A	17%	*	18%	*	Distributor A	26%	17%	27%	18%
Distributor B	Distributor B	18%	14%	16%	12%	Distributor B	21%	18%	18%	16%
Distributor C		*	*	*	13%
Distributor D	Distributor D	17%	*	15%	*	Distributor D	23%	17%	23%	15%
Distributor E	Distributor E	10%	*	*	*	Distributor E	11%	10%	*	*

* Represents less than 10% of revenue for the period.

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Deferred revenue related to unsatisfied performance obligations was included in the following consolidated balance sheet accounts in the amounts shown:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	9.0	$	3.5	Accrued expenses and other current liabilities	$	13.8	$	16.1
Other liabilities	Other liabilities	1.5		1.5		Other liabilities	1.8		1.6
Total deferred revenue	Total deferred revenue	$	10.5	$	5.0	Total deferred revenue	$	15.6	$	17.7

Revenue recognized from amounts included in deferred revenue at the beginning of each respective period was as follows:


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021	2022		2021	(in millions)	2023		2022		2023		2022
Deferred revenue recognized	Deferred revenue recognized	$	0.3	0.1	$	1.8	4.0	Deferred revenue recognized	$	3.0	$	0.3	$	15.2	$	1.8

Contract acquisition costs, representing capitalized commission costs related to new customers, net of amortization, were included in the following consolidated balance sheet captions in the amounts shown:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	14.2	$	13.3	Prepaid expenses and other current assets	$	16.4	$	15.2
Other assets	Other assets	28.2		26.1		Other assets	32.4		31.3
Total capitalized contract acquisition costs, net	Total capitalized contract acquisition costs, net	$	42.4	$	39.4	Total capitalized contract acquisition costs, net	$	48.8	$	46.5

The Company recognized ~~$3.7~~$4.1 million and ~~$3.2~~$3.7 million of amortization of capitalized contract acquisition costs during the three months ended September 30, 2023 and 2022, respectively, and ~~2021, respectively. The Company~~ recognized ~~$10.7~~$12.1 million and ~~$9.1~~$10.7 million of amortization of capitalized contract acquisition costs during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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Note 3. Cash and Cash Equivalents

The following table provides a summary of cash and cash equivalents:

(in millions) September 30, 2022 December 31, 2021
Cash $ 117.7 $ 159.3
Money market mutual funds 553.4 630.7
Time deposits 50.4 —
Restricted cash 0.5 1.6
Total cash and cash equivalents 722.0 791.6
Restricted cash included in other assets 15.1 14.8
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 737.1 $ 806.4

~~The restricted cash included in other assets on the consolidated balance sheet is primarily held as a compensating balance against long-term borrowings.~~


(in millions)	September 30, 2023		December 31, 2022
Cash	$	118.1	$	136.1
Money market mutual funds	447.0		487.3
Time deposits	104.7		50.8
Restricted cash	15.6		0.5
Total cash and cash equivalents	685.4		674.7
Restricted cash included in other assets	—		15.0
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	685.4	$	689.7

All cash and cash equivalents are Level 1 in the fair value hierarchy. Restricted cash is held as a compensating balance against long-term borrowings.

Certain of the Company’s subsidiaries participate in a multi-currency, notional cash pooling arrangement with a third-party bank provider to manage global liquidity requirements. Under this arrangement, ~~which began in August 2022,~~ cash deposited by participating subsidiaries may be used to offset amounts owed to the bank by other participating subsidiaries to the extent the overall balance in the cash pool is at least zero, providing legal rights of offset. As of September 30, ~~2022,~~2023, the Company had a net cash position of approximately ~~$0.2~~$1.7 million, consisting of a gross cash position of approximately ~~$43.2~~$51.9 million less cash borrowings of approximately ~~$43.0~~$50.2 million by participating subsidiaries, which is reflected as cash and cash equivalents in the consolidated balance sheet.

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Note 4. Accounts Receivable, Net

At the end of each period, net accounts receivable were comprised of the following:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Accounts receivable trade, net	Accounts receivable trade, net	$	125.9	$	101.2	Accounts receivable trade, net	$	174.5	$	128.6
Unbilled receivable	Unbilled receivable	27.2		34.0		Unbilled receivable	15.9		12.3
Accounts receivable, net	Accounts receivable, net	$	153.1	$	135.2	Accounts receivable, net	$	190.4	$	140.9

The percentages of total net accounts receivable trade for customers that represent 10% or more of total net accounts receivable trade were as follows:

September 30, 2022 December 31, 2021
Distributor A 28% 21%
Distributor B 10% *
Distributor D 24% 15%

* Represents less than 10% of net accounts receivable trade as of period end.


	September 30, 2023	December 31, 2022
Distributor A	35%	34%
Distributor B	14%	11%
Distributor D	31%	23%

Note 5. Inventories

At the end of each period, inventories were comprised of the following:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Raw materials	Raw materials	$	86.1	$	70.0	Raw materials	$	107.2	$	79.1
Work in process	Work in process	66.5		112.6		Work in process	56.2		84.2
Finished goods	Finished goods	175.0		120.6		Finished goods	247.4		183.5
Total inventories	Total inventories	$	327.6	$	303.2	Total inventories	$	410.8	$	346.8

Amounts charged to the consolidated statements of operations for excess and obsolete inventory were $1.5 million and $2.0 million for the three months ended September 30, 2023 and 2022, respectively, and were $1.9 million and $3.5 million for the nine months ended September 30, 2023 and 2022, respectively.

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Note 6. Cloud Computing Costs

Capitalized costs to implement cloud computing arrangements at cost and accumulated amortization were as follows:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Short-term portion	Short-term portion	$	17.3	$	18.4	Short-term portion	$	24.1	$	18.0
Long-term portion	Long-term portion	78.7		49.2		Long-term portion	110.3		87.1
Total capitalized implementation costs	Total capitalized implementation costs	96.0		67.6		Total capitalized implementation costs	134.4		105.1
Less: accumulated amortization	Less: accumulated amortization	(13.2)		(4.4)		Less: accumulated amortization	(31.0)		(17.1)
Capitalized implementation costs, net	Capitalized implementation costs, net	$	82.8	$	63.2	Capitalized implementation costs, net	$	103.4	$	88.0

Amortization expense is recognized on a straight-line basis over the expected term of the hosting arrangements, which range from three to ~~five~~ten years. Amortization expense was ~~$3.8~~$5.4 million and ~~$0.8~~$3.8 million for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and was ~~$8.8~~$14.7 million and ~~$2.1~~$8.8 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Note 7. Acquisition~~

On January 3, 2022, the Company acquired substantially all of the assets related to the manufacture and production of Shape-Memory Alloy (“SMA”) wire assemblies that are used in the production of Omnipods from Dynalloy, Inc., a maker of dynamic alloys. The aggregate purchase price was $29.0 million, of which $26.0 million was paid in cash upon closing. The Company retained the remaining $3.0 million as a holdback to satisfy any post-closing working capital adjustment and to secure the seller’s indemnification obligations under the purchase agreement. The Company will release any remaining holdback funds to the seller twelve months from the closing date. Transaction costs were expensed as incurred and were not material.

~~The following table summarizes the fair value allocation of the assets acquired at the date of acquisition:~~


~~(in millions)~~
~~Inventories~~	$	~~0.5~~
~~Property, plant and equipment~~	~~0.9~~
~~Other assets~~	~~0.2~~
~~Goodwill (tax deductible)~~	~~12.0~~
~~Developed technology (15 year useful life)~~	~~15.4~~
~~Total assets acquired~~	$	~~29.0~~

The primary factor that contributed to an acquisition price in excess of the fair value of assets acquired and the establishment of goodwill was the expected cost savings resulting from the integration of a supplier.

Note 8.7. Goodwill and Other Intangible Assets, Net

The ~~change in the~~ carrying amount of goodwill ~~for the period is as follows:~~


~~(in millions)~~
~~Goodwill at December 31, 2021~~	$	~~39.8~~
~~Acquisition (Note 7)~~	~~12.0~~
~~Foreign currency translation~~	~~(0.2)~~
~~Goodwill at September 30, 2022~~	$	~~51.6~~

was $51.7 million at both September 30, 2023 and December 31, 2022.

The gross carrying amount, accumulated amortization and net book value of intangible assets at the end of each period were as follows:


		September 30, 2022						December 31, 2021							September 30, 2023						December 31, 2022
(in millions)	(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	Customer relationships	$	43.2	$	(26.4)	$	16.8	$	43.4	$	(23.4)	$	20.0	Customer relationships	$	43.2	$	(30.0)	$	13.2	$	43.2	$	(27.5)	$	15.7
Internal-use software	Internal-use software	32.8		(11.6)		21.2		25.5		(10.2)		15.3		Internal-use software	41.3		(13.5)		27.8		34.8		(12.0)		22.8
Developed technology	Developed technology	15.4		(0.8)		14.6		—		—		—		Developed technology	27.4		(2.5)		24.9		27.4		(1.0)		26.4
Intellectual property		1.4		(0.3)		1.1		1.6		(0.3)		1.3
Patents														Patents	36.2		(2.6)		33.6		11.0		(0.4)		10.6
Total intangible assets	Total intangible assets	$	92.8	$	(39.1)	$	53.7	$	70.5	$	(33.9)	$	36.6	Total intangible assets	$	148.1	$	(48.6)	$	99.5	$	116.4	$	(40.9)	$	75.5

Amortization expense for intangible assets was ~~$1.9~~$2.6 million and ~~$1.6~~$1.9 million for the three months ended September 30, 2023 and 2022, respectively, and ~~2021, respectively. Amortization expense for intangible assets~~ was ~~$5.4~~$7.7 million and ~~$5.1~~$5.4 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

In February 2023, the Company paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based automated insulin delivery technologies. The acquired patent assets have a useful life of 11 years.

Note 9.8. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities were as follows:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Accrued rebates						Accrued rebates	$	127.4	$	69.6
Employee compensation and related costs	Employee compensation and related costs	$	68.5	$	70.3	Employee compensation and related costs	98.7		95.9
Accrued rebates		58.6		28.7
Professional and consulting services						Professional and consulting services	38.8		27.5
Warranty liability - current portion	Warranty liability - current portion	39.5		2.4		Warranty liability - current portion	7.0		57.3
Professional and consulting services		25.0		22.8
Other	Other	50.1		40.1		Other	47.3		50.7
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	241.7	$	164.3	Accrued expenses and other current liabilities	$	319.2	$	301.0

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Product Warranty Costs

The Company provides a four-year warranty on Personal Diabetes Managers (“PDMs”) and Controllers sold in the United States and ~~PDMs sold in~~ Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications. The Company estimates its warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims. Cost to service the claims reflects the current product cost, reclaim costs, shipping and handling costs and direct and incremental distribution and customer service support costs. Since the Company continues to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves. Warranty expense is recorded in cost of revenue in the consolidated statements of operations. ~~Cost to service the claims reflects the current product cost.~~ Reconciliations of the changes in the Company’s product warranty liability were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022		2023		2022
Product warranty liability at beginning of period	Product warranty liability at beginning of period	$	11.6	$	6.5	$	6.8	$	6.7	Product warranty liability at beginning of period	$	21.3	$	11.6	$	62.1	$	6.8
Warranty expense - other		3.4		3.0		14.5		7.9
Warranty expense - voluntary medical device correction		36.8		—		36.8		—
Warranty expense										Warranty expense	5.1		40.2		13.9		51.3
Change in estimate	Change in estimate	(3.1)		—		(3.1)		—		Change in estimate	(1.9)		(3.1)		(10.7)		(3.1)
Warranty claims settled		(3.9)		(2.8)		(10.2)		(7.9)
Warranty fulfillment										Warranty fulfillment	(12.6)		(3.9)		(53.4)		(10.2)
Product warranty liability at the end of period	Product warranty liability at the end of period	$	44.8	$	6.7	$	44.8	$	6.7	Product warranty liability at the end of period	$	11.9	$	44.8	$	11.9	$	44.8

~~In October~~During the fourth quarter of 2022, the Company issued atwo voluntary medical device correction ~~notice~~notices (“MDCs”), one for its Omnipod DASH PDM relating to its ~~battery. The Company accrued an estimated liability of $36.8 million related~~battery and the other for its Omnipod 5 Controller relating to ~~this issue during~~its charging port and cable. During the ~~three and~~ nine months ended September 30, 2023, the Company revised the estimated liability for these MDCs by $10.7 million. This change in estimate primarily relates to lower distribution costs. The Company had a liability of $2.8 million and $54.6 million related to the MDCs included in its product warranty liability at September 30, 2023 and December 31, 2022, respectively.

Note 9. Leases

As of September 30, 2023, the ~~majority~~Company leased certain automobiles and facilities for offices, laboratories, manufacturing, and warehousing, all of which ~~represents product, reclaim~~were classified as operating leases. Certain of the Company’s operating leases include escalating rental payments, some include the option to extend for up to 10 years, and ~~shipping~~some include options to terminate the leases at certain times within the lease term. The Company also leases land and ~~handling costs~~a manufacturing building in Malaysia, which are classified as finance leases. The Company has the option to purchase the property at any point after the completion of the construction of the leased building and is contractually obligated to purchase the ~~remainder~~property nine months after its completion. Because the Company is reasonably certain to purchase the property, the lease term of ~~which represents incremental distribution~~each finance lease equals the economic life of the underlying asset. While the building is still under construction, the lease commenced as the Company has obtained access to the building to construct improvements.

As of September 30, 2023, lease assets and ~~customer service support costs.~~lease liabilities were included in the following consolidated balance sheet accounts in the amounts shown:


(in millions)	September 30, 2023		December 31, 2022
Operating leases:
Operating lease asset:
Other assets	$	28.5	$	26.0
Operating lease liabilities:
Accrued expenses and other current liabilities	$	3.3	$	3.6
Other liabilities	30.2		27.4
Total operating lease liabilities	$	33.5	$	31.0
Finance leases:
Finance lease assets:
Property, plant and equipment, net	$	37.1	$	—
Finance lease liabilities:
Current portion of long-term debt and finance leases	$	22.1	$	—

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The Company’s operating and financing lease cost was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Operating lease cost	$	2.3	$	2.6	$	6.4	$	6.5
Finance lease cost:
Amortization of leased assets	0.2		—		0.2		—
Interest on lease liabilities	0.3		—		0.3		—
Total finance lease cost	0.5		—		0.5		—
Total operating and financing lease cost	$	2.8	$	2.6	$	6.9	$	6.5

Supplemental cash flow information related to leases is as follows:


	Nine Months Ended September 30,
(in millions)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	4.3	$	3.3

Maturities of lease liabilities as of September 30, 2023 are as follows:


(in millions)
Years Ending December 31,	Operating Leases		Finance Lease (1)
2023	$	1.3	$	—
2024	5.6		23.2
2025	4.6		—
2026	2.8		—
2027	2.8		—
Thereafter	36.7		—
Total future minimum lease payments	53.8		23.2
Less: imputed interest	(20.3)		(1.1)
Present value of future minimum lease payments	$	33.5	$	22.1

(1) Excludes optional variable lease payments.

As of September 30, 2023, the weighted-average remaining lease term and weighted-average discount rate for leases were as follows:


	Operating Leases		Finance Leases
Weighted average remaining lease term	12.5 years		1 year
Weighted-average discount rate used to determine the operating lease liability	7.1	%	6.0	%

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Note 10. Debt

The components of debt consisted of the following:


(in millions)	(in millions)	September 30, 2022		December 31, 2021		(in millions)	September 30, 2023		December 31, 2022
Revolving Credit Facility expires June 2028						Revolving Credit Facility expires June 2028	$	—	$	—
Equipment Financing due May 2024						Equipment Financing due May 2024	4.4		9.5
Equipment Financing due November 2025						Equipment Financing due November 2025	17.1		22.5
5.15% Mortgage due November 2025						5.15% Mortgage due November 2025	63.8		65.5
0.375% Convertible Senior Notes due September 2026	0.375% Convertible Senior Notes due September 2026	$	800.0	$	800.0	0.375% Convertible Senior Notes due September 2026	800.0		800.0
Equipment Financing						Equipment Financing	12.7		—
Term loan due May 2028	Term loan due May 2028	493.8		497.5		Term loan due May 2028	488.7		492.5
Revolving Credit Facility expires May 2024		—		—
Equipment financing due May 2024		11.2		16.0
Equipment financing due November 2025		24.3		29.6
Equipment financing due July 2028		35.3		38.2
5.15% Mortgage due November 2025		66.1		67.7
Equipment Financing due July 2028						Equipment Financing due July 2028	30.4		34.4
Finance lease obligation(1)						Finance lease obligation(1)	22.1		—
Unamortized debt discount	Unamortized debt discount	(8.0)		(159.9)		Unamortized debt discount	(6.8)		(7.6)
Debt issuance costs	Debt issuance costs	(16.0)		(15.2)		Debt issuance costs	(12.0)		(15.0)
Total debt, net	Total debt, net	1,406.7		1,273.9		Total debt, net	1,420.4		1,401.8
Less: current portion	Less: current portion	26.9		25.1		Less: current portion	49.8		27.5
Total long-term debt, net	Total long-term debt, net	$	1,379.8	$	1,248.8	Total long-term debt, net	$	1,370.6	$	1,374.3

(1) Refer to Note 9 for information regarding our finance lease obligation.

0.375% Convertible Senior Notes

The Company’s 0.375% Convertible Senior Notes due September 2026 (the “Notes” or “Convertible Notes”) have an effective interest rate of 0.76%. The Notes are convertible into the Company’s common stock at an initial conversion rate of 4.4105 shares of common stock per $1,000 principal amount of the notes, which is equivalent to a conversion price of $226.73 per share, subject to adjustment under certain circumstances. The notes will be convertible June 1, 2026 through August 28, 2026 by its holders for any ~~reason, and~~reason. Additionally, on or after September 6, 2023, the Company may redeem for cash all, or any portion of the Notes, if its stock price has been equal to or greater than $294.75 for at least 20 of the prior ~~to then under certain circumstances, and be settled with cash, shares, or a combination~~30 consecutive trading days including the date which the Company provides notice of ~~both.~~redemption.

Additional interest of 0.5% per annum is payable if the Company fails to timely file required documents or reports with the Securities and Exchange Commission (“SEC”). If the Company merges or consolidates with a foreign entity, the Company may be required to pay additional taxes. The Company determined that the higher interest payments and tax payments required in certain circumstances were embedded derivatives that should be bifurcated and accounted for at fair value. The Company assessed the value of the embedded derivatives at each balance sheet date and determined it had nominal value.

In conjunction with the issuance of the Notes, the Company ~~paid $85.4 million to enter into~~purchased capped ~~call options (“Capped Calls”)~~calls on the Company’s common stock with certain counterparties ~~which was recorded as a reduction to additional paid-in capital on the~~

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~~consolidated balance sheet. By entering into the Capped Calls, the Company expects~~ to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the Notes. The ~~Capped Calls~~capped calls have an initial strike price of $335.90 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock of $167.95 per share on the date of the transaction. The ~~Capped Calls~~capped calls cover 3.5 million shares of common stock.

As of September 30, 2023 and December 31, 2022, the net carrying amount of the Notes was $791.1 million and $788.8 million, respectively, net of unamortized issuance costs of $8.9 million and $11.2 million, respectively.

The components of interest expense related to the Notes were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Contractual interest expense	$	0.8	$	0.8	$	2.3	$	2.3
Amortization of debt issuance costs	0.7		0.7		2.2		2.2
Total interest recognized on the Convertible Notes	$	1.5	$	1.5	$	4.5	$	4.5

Equipment Financing

In May 2023, the Company entered into an arrangement under which the Company may obtain up to $24.0 million of financing for manufacturing equipment. The Company is involved in the construction of the manufacturing equipment; accordingly, it is included in property, plant and equipment on the consolidated balance sheet at September 30, 2023. The Company’s obligation reflects payments

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made to date by the third-party bank to the equipment manufacturer, net of discount and less repayment of principal. The financing obligation will mature 36 months following completion of construction and has an effective interest rate of approximately 9.4%.

Senior Secured Credit Agreement

In ~~May 2022,~~June 2023, the Company increased the ~~borrowing capacity under the~~size of its Revolving Credit Facility by ~~$10.0~~$200.0 million bringing the total ~~borrowing capacity~~ to ~~$70.0 million.~~

~~1.375% Convertible Senior Notes~~

~~During~~$300.0 million and extended the ~~three months ended June 30, 2021,~~maturity date of the Company repurchased $370.4 million in principal ($305.7 million net of discount and issuance costs) of its 1.375% Convertible Senior Notes due November 2024 (“1.375% Notes”) for $460.8 million in cash and the issuance of 2.2 million shares with a fair value of $622.7 million. The debt repurchase resulted in a $40.1 million loss on extinguishment, including cash paidrevolving credit facility to the ~~note holders as an inducement~~earlier of June 2028 or 91 days prior to ~~convert and transaction costs.~~

~~During~~ the ~~three months ended September 30, 2021, $20.0 million in principal~~maturity date of the ~~1.375% Notes were converted into approximately 215,000 shares with~~Company’s term loan if still outstanding. Under the amended credit agreement, outstanding borrowings bear interest at a ~~fair value~~rate of ~~$59.7 million. The conversion resulted in a $1.5 million loss~~Secured Overnight Financing Rate plus an applicable margin of 2.625% to 3.25%, based on ~~extinguishment of debt.~~the Company's net leverage ratio and credit rating.

Fair Value of Debt

The carrying amount and the estimated fair value of the Company’s debt were as follows:

September 30, 2022 December 31, 2021
(in millions) Carrying
Value Estimated
Fair Value Carrying
Value
Estimated
Fair Value (1)
0.375% Convertible Senior Notes (1)
$ 788.1 $ 809.4 $ 638.8 $ 938.8
Term loan (2)
482.9 481.4 485.2 498.1
Equipment Financings (3)
70.8 70.8 83.7 83.7
5.15% Mortgage (3)
64.9 64.9 66.2 66.2
Total $ 1,406.7 $ 1,426.5 $ 1,273.9 $ 1,586.8


	September 30, 2023				December 31, 2022
(in millions)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value (1)
Term loan due May 2028(1)	$	479.9	$	487.5	$	482.1	$	485.1
0.375% Convertible Senior Notes(2)	791.1		562.7		788.8		1,038.7
Equipment financings(3)	64.2		64.2		66.4		66.4
5.15% Mortgage(3)	63.1		63.1		64.5		64.5
Total	$	1,398.3	$	1,177.5	$	1,401.8	$	1,654.7

(1) Term debt is classified as Level 1 in the fair value hierarchy. Fair value was determined using quoted market prices.

(2)The Notes are classified as Level 2 in the fair value hierarchy. Fair value was determined using the Company’s quoted stock price and the contractual conversion rate.

~~(2)~~ ~~Term debt is classified as Level 1 in the fair value hierarchy. Fair value was determined using quoted market prices.~~

(3) The equipment financings and mortgage are classified as Level 3 in the fair value hierarchy. The fair values ~~were determined using the cost bases~~ of the financial liabilities ~~which~~ approximate their carrying ~~values.~~values and were determined using their cost bases.

Note 11. Derivative Instruments

The Company manages interest rate exposure through the use of interest rate swap transactions with financial institutions acting as principal counterparties. Under the Company’s interest rate swap agreements that expire on April 30, 2025, the Company receives variable rate interest payments and pays fixed interest rates of 0.95% and 0.96% on a total notional value of $480.0 million of its Term Loan. The Company has designated the interest rate swaps as cash flow hedges.

The fair value of interest rate swaps, which are classified as Level 2 in the fair value hierarchy, represent the estimated amounts the Company would receive or pay to terminate the contracts and is determined using industry standard valuation models and market-based observable inputs, including credit risk and interest rate yield curves. The fair value of the interest rate swaps was ~~$38.4~~$31.4 million and ~~$4.5~~$36.9 million at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and was included in other assets on the consolidated balance sheets. As of September 30, 2023, the Company estimates that $21.0 million of net gains related to the interest rate swaps included in accumulated other comprehensive income will be reclassified into the statement of operations over the next 12 months. When recognized, gains and losses on cash flow hedges reclassified from accumulated other comprehensive income are recognized within interest expense, net.

Note 12. Commitments and Contingencies

Legal Proceedings

~~In June 2020, Roche Diabetes Care, Inc. (“Roche”) filed a patent infringement lawsuit against~~During the Company in the United States District Court for the District of Delaware alleging that the Company’s manufacture and sale of its Omnipod Insulin Management System, including OmniPods, Personal Diabetes Managers, and other components of the system, and kits in the United States infringed Roche’s expired U.S. Patent 7,931,613. Roche was seeking monetary damages and attorneys’ fees and costs. In Julynine months ended September 30, 2022, the Company entered into a Settlement and License Agreement (the “Settlement Agreement”) with Roche Diabetes Care, Inc. (“Roche”) to settle ~~the~~ pending

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patent infringement litigation. Pursuant to the Settlement Agreement, in exchange for a release of claims, mutual covenant not to sue for five years, and license to the patent in suit from Roche, the Company made a one-time payment of $20 million to Roche. ~~On July 12, 2022, following the filing by the parties of a Stipulation of Dismissal, the Court ordered the case dismissed with prejudice.~~ The $20 million charge is included in selling, general and administrative expenses for the nine months ended September 30, 2022.

The Company is, from time to time, involved in the normal course of business in various legal proceedings, including intellectual property, contract, employment and product liability suits. The Company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its results of operations.

~~Contract Dispute~~

The Company is engaged in negotiations over a contractual dispute involving in-licensed intellectual property. Offers to settle the dispute have been made by both the Company and the other party ranging from $5.7 million to $36 million. In connection with discussions to resolve this matter, during the nine months ended September 30, 2022, the Company accrued an estimated liability of $5.7 million. The ultimate resolution of this matter is uncertain and could have a material effect on the Company’s results of operations.

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Note 13. Stock-Based Compensation Expense

Compensation expense related to stock-based awards was recorded as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022		2023		2022
Cost of revenue	Cost of revenue	$	0.1	$	0.1	$	0.3	$	0.3	Cost of revenue	$	0.1	$	0.1	$	0.3	$	0.3
Research and development expenses	Research and development expenses	2.1		1.9		6.3		5.8		Research and development expenses	3.5		2.1		9.6		6.3
Selling, general and administrative expenses	Selling, general and administrative expenses	6.8		6.2		23.1		19.7		Selling, general and administrative expenses	6.9		6.8		25.8		23.1
Total	Total	$	9.0	$	8.2	$	29.7	$	25.8	Total	$	10.5	$	9.0	$	35.7	$	29.7

Note 14. Accumulated Other Comprehensive Income ~~(Loss)~~

Changes in the components of accumulated other comprehensive income, ~~(loss),~~ net of tax, were as follows:


		Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022							Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
(in millions)	(in millions)	Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive Income		Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive (Loss) Income		(in millions)	Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive Income		Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive Income
Balance at beginning of period	Balance at beginning of period	$	(20.0)	$	27.2	$	7.2	$	(6.7)	$	4.5	$	(2.2)	Balance at beginning of period	$	(17.7)	$	34.0	$	16.3	$	(17.0)	$	37.0	$	20.0
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(11.6)		12.7		1.1		(24.9)		34.7		9.8		Other comprehensive (loss) income before reclassifications	(6.1)		2.8		(3.3)		(6.8)		9.2		2.4
Amounts reclassified to net loss		—		(1.5)		(1.5)		—		(0.8)		(0.8)
Amounts reclassified to net income														Amounts reclassified to net income	—		(5.4)		(5.4)		—		(14.8)		(14.8)
Balance at the end of period	Balance at the end of period	$	(31.6)	$	38.4	$	6.8	$	(31.6)	$	38.4	$	6.8	Balance at the end of period	$	(23.8)	$	31.4	$	7.6	$	(23.8)	$	31.4	$	7.6

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
(in millions) Foreign Currency Translation Adjustment Unrealized Gain on Available-for-sale Securities Unrealized Loss on Cash Flow Hedges Accumulated Other Comprehensive Income (Loss) Foreign Currency Translation Adjustment Unrealized Gain on Available-for-sale Securities Unrealized Loss on Cash Flow Hedges Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period $ 1.3 $ — $ (0.6) $ 0.7 $ 5.2 $ 0.3 $ — $ 5.5
Other comprehensive loss before reclassifications (4.4) — (0.3) (4.7) (8.3) (0.3) (1.2) (9.8)
Amounts reclassified to net income (loss) — — 0.6 0.6 — — 0.9 0.9
Balance at the end of period $ (3.1) $ — $ (0.3) $ (3.4) $ (3.1) $ — $ (0.3) $ (3.4)

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~~Note 15. Interest Expense, Net~~

~~Interest expense, net was as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2022 2021 2022 2021
Cash interest, net of interest rate swaps $ 7.9 $ 8.4 $ 23.9 $ 18.9
Accretion of debt discount 0.4 7.5 1.1 29.2
Amortization of debt issuance costs 1.1 0.9 3.2 2.7
Capitalized interest (0.2) (0.4) (0.9) (4.2)
Interest expense, net of portion capitalized 9.2 16.4 27.3 46.6
Interest income (2.4) (0.1) (3.3) (0.5)
Interest expense, net $ 6.8 $ 16.3 $ 24.0 $ 46.1


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
(in millions)	Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive Income		Foreign Currency Translation Adjustment		Unrealized Gain on Cash Flow Hedges		Accumulated Other Comprehensive (Loss) Income
Balance at beginning of period	$	(20.0)	$	27.2	$	7.2	$	(6.7)	$	4.5	$	(2.2)
Other comprehensive (loss) income before reclassifications	(11.6)		12.7		1.1		(24.9)		34.7		9.8
Amounts reclassified to net loss	—		(1.5)		(1.5)		—		(0.8)		(0.8)
Balance at the end of period	$	(31.6)	$	38.4	$	6.8	$	(31.6)	$	38.4	$	6.8

Note ~~16.~~15. Income Taxes

The Company’s effective tax rate for the three and nine months ended September 30, ~~2022~~2023 was 3.4% and 3.6%, compared with 9.0% and 0.7%~~, compared with 16.9% and 4.4%~~ for the three and nine months ended September 30, ~~2021,~~2022, respectively. ~~Income tax benefits have not been recorded for losses in jurisdictions where valuation allowances exist against net deferred tax assets.~~ The Company had a full valuation allowance against its net deferred tax assets in the United Kingdom and the United States at September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company had no uncertain tax positions at September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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Note ~~17.~~16. Net Income (Loss) ~~Income~~ Per Share

Basic net income (loss) ~~income~~ per share is computed by dividing net income (loss) ~~income~~ by the weighted average number of common shares outstanding for the period. Diluted net income (loss) ~~income~~ per share is computed using the weighted average number of common shares outstanding and, when dilutive, common share equivalents. The ~~weighted-average number of common shares used in the~~ computation of basic and diluted net ~~loss~~income (loss) per share ~~were~~was as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Weighted average number of common shares outstanding, basic 69,418 68,869 69,343 67,236
Stock options — 650 — —
Restricted stock units — 100 — —
Weighted average number of common shares outstanding, diluted 69,418 69,619 69,343 67,236


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except share and per share data)	2023		2022		2023		2022
Net income (loss)	$	51.9	$	(5.2)	$	103.0	$	(12.4)
Add back interest expense, net of tax	2.5		—		—		—
Net income (loss), diluted	$	54.4	$	(5.2)	$	103.0	$	(12.4)

Weighted average number of common shares outstanding, basic (in thousands)	69,823		69,418		69,715		69,343
Stock options	237		—		317		—
Restricted stock units	36		—		79		—
Convertible Notes	3,528		—		—		—
Weighted average number of common shares outstanding, diluted (in thousands)	73,624		69,418		70,111		69,343

Net income (loss) per share
Basic	$	0.74	$	(0.08)	$	1.48	$	(0.18)
Diluted	$	0.74	$	(0.08)	$	1.47	$	(0.18)

The number of common share equivalents excluded from the computation of diluted net income (loss) ~~income~~ per share because either the effect would have been anti-dilutive, or the performance criteria related to the units had not yet been met, were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)
2022 2021 2022 2021
1.375% Convertible Senior Notes due November 2024 — 147 — 2,690
0.375% Convertible Senior Notes due September 2026 3,528 3,528 3,528 3,528
Restricted stock units 227 177 314 327
Stock options 595 60 602 776
Total 4,350 3,912 4,444 7,321

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~~Note 18. Subsequent Events~~

In October 2022, the Company entered into an agreement to acquire real estate in Malaysia, including land and building to be constructed thereon (“the Malaysia Purchase Agreement”). The building is expected to be completed no later than January 1, 2024, at which time the Company will have the option to purchase or lease the real estate. If the Company decides to lease the real estate, it will have the option to purchase the property at any point after the commencement date of the lease and is contractually obligated to purchase the property nine months after the commencement date of the lease. Upon entering into the Malaysia Purchase Agreement, the Company made an upfront payment of $4.0 million. Total undiscounted future lease payments, including the price to purchase the asset, are approximately $15.9 million.

In August 2022, the Company entered into a $20 million uncommitted letter of credit facility. In October 2022, concurrently with the execution of the Malaysia Purchase Agreement, a $16.1 million letter of credit was issued under this facility to backstop a bank guarantee for the same amount. The bank guarantee serves as security for the building while under construction until the Company purchases the property. The Company pays interest on outstanding borrowings and commitment fees on the maximum amount available to be drawn under the letter of credit at a rate of between 1.65% and 2.25%, depending on the Company’s credit rating. The letter of credit includes customary covenants, none of which are considered restrictive to the Company’s operations.


	Three Months Ended September 30,		Nine Months Ended September 30,
(in thousands)	2023	2022	2023	2022
Restricted stock units	352	227	294	314
Stock options	160	595	157	602
Convertible Notes	—	3,528	3,528	3,528
Total	512	4,350	3,979	4,444

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, ~~2021~~2022 and in this quarterly report.

Overview

We are primarily engaged in the development, manufacture and sale of our proprietary Omnipod System, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod (the “Pod”) device that ~~is worn~~the user fills with insulin and wears directly on the body for up to three days at a ~~time;~~time, which delivers personalized doses of insulin, and ~~its~~the PDM or Controller, a wireless ~~companion,~~handheld device that programs the ~~handheld PDM/Controller.~~Pod with the user’s personalized insulin-delivery instructions and wirelessly monitors the Pod’s operation. The Omnipod System includes: Classic Omnipod, its next generation Omnipod DASH, and the most recent generation Omnipod 5, all of which ~~features discreet and easy-to-use devices, communicates wirelessly, provides for virtually pain-free automated cannula insertion and eliminates~~eliminate the need for ~~MDI therapy~~multiple daily injections using syringes or insulin pens or the use of pump and tubing. We believe that the Omnipod System’s unique proprietary design and features allow people with insulin-dependent diabetes to manage their diabetes with unprecedented freedom, comfort, convenience and ease.

~~In addition to the diabetes market space, we~~We have ~~partnered with pharmaceutical and biotechnology companies to tailor~~also tailored the Omnipod System technology platform for the delivery of subcutaneous drugs ~~across~~in other therapeutic areas. Most of our drug delivery revenue currently 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.

Our ~~mission is to improve the lives of people with diabetes. To assist in achieving this mission, we are focused on the following key strategic imperatives:~~

•~~expanding access and awareness;~~

•~~delivering consumer-focused innovation;~~

•~~growing our global addressable market; and~~

•~~driving operational excellence.~~

~~Our~~ long-term financial objective is to sustain profitable growth. To achieve this goal, ~~our efforts have been focused on launching our~~we launched Omnipod 5® ~~Automated Insulin Delivery System (“Omnipod 5”), which~~ in ~~January~~the United States in 2022 ~~received U.S. Food and Drug Administration (“FDA”) clearance for individuals aged six years and older with type 1 diabetes. Our limited market release of Omnipod 5 began in February~~ and in the United Kingdom and Germany in June and August we launched our full market release. Accordingly, Omnipod 5 is now available through retail pharmacies. Additionally, during the quarter, the indication for Omnipod 5 was expanded to include individuals aged two to five.2023, respectively. We are ~~also~~ working ~~to bring Omnipod 5 to our international markets. We recently received CE Mark approval under the European Medical Device Regulation and we are currently focused~~ on further building our international teams and advancing our regulatory, reimbursement, and market development ~~efforts.~~efforts so we can bring Omnipod 5 to additional international markets. We ~~expect~~plan to launch Omnipod 5 in more European markets in 2024.

We have completed a randomized control trial in the U.S. and France for Omnipod 5 with DexCom’s G6 continuous glucose monitor (“CGM”) to support our ~~first international~~pricing and market access initiatives. We also continue to expand market access and awareness of Omnipod through our direct to consumer advertising programs and through growing our presence in ~~2023~~the U.S. pharmacy channel, where access to Omnipod 5 and toOmnipod DASH is simpler and affordable, as no up-front investment is required. As we continue our ~~international roll out more broadly~~growth in the pharmacy channel, we plan to phase-out our Classic Omnipod in the U.S. this year, since the vast majority of our customer base is no longer using this product.

We have reached our enrollment goal for our pivotal trial for Omnipod 5 with the goal of expanding Omnipod 5’s indication to type 2 users. We expect to complete enrollment this year. Additionally, in April 2023, we received U.S. Food and Drug Administration (“FDA”) clearance for Omnipod GOTM, our basal-only Pod for individuals with type 2 diabetes age 18 or older who require insulin. During the third quarter of 2023, we began our commercial pilot program in the U.S. for Omnipod GO, which we expect to fully launch in 2024.

~~Additionally, we~~We also continue to increase our presence within our existing markets and expand internationally in a targeted and strategic manner. We opened an office in Dubai to serve as our primary local presence and regional infrastructure in the Middle East, launched Omnipod in Saudi Arabia, and expanded into the United Arab Emirates.

~~Further, we have been taking~~take steps to ~~further~~ strengthen our global manufacturing capabilities. We are ~~optimizing our operations in China by consolidating our production in that region into one location. We also broke ground on~~currently constructing a new manufacturing plant in Malaysia to support our international expansion strategy, further ensure product supply, and drive higher gross margins over time. We expect to begin production at this new manufacturing facility in 2024.

Finally, we ~~plan to~~ continue to ~~expand awareness of and access to our products, while also focusing~~focus on our product development ~~efforts. Our direct to consumer advertising programs continue to drive increased awareness of Omnipod. To accelerate our~~ efforts, ~~to secure reimbursement for Omnipod 5, we are currently enrolling individuals in a randomized control trial in France and the U.S. Our product development efforts include focusing on~~including automated insulin delivery (“AID”) offerings, ~~including~~such as choice of ~~continuous glucose monitor~~smartphone integration and ~~smartphone integration. In addition, we continue to focus on~~CGM, and enhancing the customer experience through digital product and data capabilities. We ~~have also developed a basal-only Pod for individuals~~are actively enrolling participants in our clinical study of Omnipod 5 with the integration of the Abbott FreeStyle Libre 2 CGM. This includes participants with type 21 diabetes in both the adult and pediatric age groups in the United Kingdom, France and Belgium. Additionally, we recently received FDA clearance for the Omnipod 5 App for iPhone and expect to ~~submit our 510(k) application to the FDA~~launch in the ~~fourth quarter. Achieving the above strategic imperatives is expected to require additional investments~~U.S. in ~~certain initiatives and personnel, as well as enhancements to our supply chain operation capacity, efficiency and effectiveness.~~2024.

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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 Omnipod System’s unique patented design ~~allow~~allows us to provide pump therapy at a relatively low or no up-front investment ~~which~~in regions where reimbursement allows for it and our pay-as-you-go pricing model reduces the risk to third-party ~~payors in the U.S., compared to tubed insulin pumps.~~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 provides ~~predictable~~ recurring revenue.

During 2022, we issued two voluntary Medical Device Corrections (“MDCs”), one in October for our Omnipod DASH PDM related to its battery and the other in November for our Omnipod 5 Controller related to its charging port and cable. In addition to the estimated liability we recorded in 2022, we have a performance obligation to replace Omnipod DASH PDMs and Omnipod 5 Controllers sold subsequent to the MDC issuances, which is expected to negatively impact gross margins and net income in 2023,

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most notably in the first half of the year. However, during the nine months ended September 30, 2023, we recorded $10.7 million of income associated with a change in our estimated liability for the MDCs primarily due to lower distribution costs, which offsets the negative impact to gross margin.

We continue to experience ~~constrained supply and~~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 are expected 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


		Three Months Ended September 30,											Three Months Ended September 30,
(dollars in millions)	(dollars in millions)	2022		2021		Percent Change		Currency Impact		Constant Currency (1)		(dollars in millions)	2023		2022		Percent Change		Currency Impact		Constant Currency (1)
U.S. Omnipod	U.S. Omnipod	$	238.1	$	167.2	42.4	%	—	%	42.4	%	U.S. Omnipod	$	320.6	$	238.1	34.6	%	—	%	34.6	%
International Omnipod	International Omnipod	88.0		93.1		(5.5)	%	(14.4)	%	8.9	%	International Omnipod	101.4		88.0		15.2	%	7.2	%	8.0	%
Total Omnipod	Total Omnipod	326.1		260.3		25.3	%	(5.2)	%	30.5	%	Total Omnipod	422.0		326.1		29.4	%	1.9	%	27.5	%
Drug Delivery	Drug Delivery	14.7		15.3		(3.9)	%	—	%	(3.9)	%	Drug Delivery	10.7		14.7		(27.2)	%	—	%	(27.2)	%
Total revenue	Total revenue	$	340.8	$	275.6	23.7	%	(4.8)	%	28.5	%	Total revenue	$	432.7	$	340.8	27.0	%	1.9	%	25.1	%


		Nine Months Ended September 30,											Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2022		2021		Percent Change		Currency Impact		Constant Currency (1)		(dollars in millions)	2023		2022		Percent Change		Currency Impact		Constant Currency (1)
U.S. Omnipod	U.S. Omnipod	$	608.6	$	461.0	32.0	%	—	%	32.0	%	U.S. Omnipod	$	856.4	$	608.6	40.7	%	—	%	40.7	%
International Omnipod	International Omnipod	272.8		274.6		(0.7)	%	(10.8)	%	10.1	%	International Omnipod	303.7		272.8		11.3	%	0.3	%	11.0	%
Total Omnipod	Total Omnipod	881.4		735.6		19.8	%	(4.0)	%	23.8	%	Total Omnipod	1,160.1		881.4		31.6	%	0.1	%	31.5	%
Drug Delivery	Drug Delivery	54.2		55.5		(2.3)	%	—	%	(2.3)	%	Drug Delivery	27.2		54.2		(49.8)	%	—	%	(49.8)	%
Total revenue	Total revenue	$	935.6	$	791.1	18.3	%	(3.7)	%	22.0	%	Total revenue	$	1,187.3	$	935.6	26.9	%	0.1	%	26.8	%

(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 September 30, ~~2022~~2023 increased ~~$65.2~~$91.9 million, or ~~23.7%~~27.0%, to ~~$340.8~~$432.7 million, compared with ~~$275.6~~$340.8 million for the three months ended September 30, ~~2021.~~2022. Constant currency revenue growth of ~~28.5%~~25.1% was primarily driven by higher volume and, to a lesser extent, favorable sales channel mix.

Total revenue for the nine months ended September 30, ~~2022~~2023 increased ~~$144.5~~$251.7 million, or ~~18.3%~~26.9%, to ~~$935.6~~$1,187.3 million, compared with ~~$791.1~~$935.6 million for the nine months ended September 30, ~~2021.~~2022. Constant currency revenue growth of ~~22.0%~~ 26.8% was primarily driven by higher volume and, to a lesser extent, favorable sales channel ~~mix.~~mix, partially offset by decreased drug delivery revenue.

U.S. Omnipod

U.S. Omnipod revenue for the three months ended September 30, ~~2022~~2023 increased ~~$70.9~~$82.5 million, or ~~42.4%~~34.6%, to ~~$238.1~~$320.6 million, compared with ~~$167.2~~$238.1 million for the three months ended September 30, ~~2021.~~2022. This increase was primarily due to higher volumes driven by growing our customer base and, to a lesser extent, growth through the pharmacy channel, where Pods have a higher average selling price due in part to the fact that we offer the PDM/Controller for no charge. These increases were partially offset by higher conversions to Omnipod 5 in the prior year as users fill both their Omnipod 5 starter kit and their first month of refills simultaneously.

U.S. Omnipod revenue for the three months ended September 30, 2023 includes $112.0 million of related party revenue, compared with $58.9 million for the three months ended September 30, 2022. The $53.1 million increase primarily resulted from growth through the pharmacy channel.

U.S. Omnipod revenue for the nine months ended September 30, 2023 increased $247.8 million, or 40.7%, to $856.4 million, compared with $608.6 million for the nine months ended September 30, 2022. This increase primarily resulted from higher volumes driven by growing our customer base and, to a lesser extent, growth through the pharmacy channel, where Pods have a higher average selling price due in part to the fact that we offer the PDM/Controller for no charge. This increase was also driven by conversions to Omnipod 5 as users generally fill both their starter kit and their first month of refills simultaneously.

U.S. Omnipod revenue for the three months ended September 30, 2022 includes $58.9 million of related party revenue, compared with $13.8 million for the three months ended September 30, 2021. The $45.1 million increase primarily resulted from growth through the pharmacy channel, and to These increases were partially offset by a ~~lesser extent, a shift~~reduction in ~~certain revenues from one distributor to another.~~

~~U.S. Omnipod revenue for the nine months ended September 30, 2022 increased $147.6 million, or 32.0%, to $608.6 million, compared with $461.0 million for the nine months ended September 30, 2021.~~ ~~This increase was~~ ~~primarily due to higher volumes driven by growing~~estimated inventory days-on-hand at our customer base and, to a lesser extent, growth through the pharmacy channel, where Pods have a higher average selling price due in part to the fact that we offer the PDM/Controller for no charge. This increase was also driven by conversions to Omnipod 5 as users generally fill both their starter kits and their first month of refills simultaneously.distributors.

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U.S. Omnipod revenue for the nine months ended September 30, ~~2022~~2023 includes ~~$162.8~~$318.0 million of related party revenue, compared with ~~$19.3~~$162.8 million for the nine months ended September 30, ~~2021.~~2022. The ~~$143.5~~$155.2 million increase primarily resulted from ~~a shift in certain revenues from one distributor to another, and to a lesser extent,~~ growth through the pharmacy channel.

For full year ~~2022,~~2023, we expect strong U.S. Omnipod revenue ~~primarily~~growth driven by ~~new customer starts~~continued volume growth of Omnipod 5 in the pharmacy channel, continued sales of Omnipod DASH, and the benefits of our recurring revenue model. We expect these increases to be partially offset by lower conversions to Omnipod 5 ~~and,~~in the second half of the year compared to ~~a lesser extent, the continued increase in Omnipod DASH sales volume, both of which are sold through the pharmacy channel.~~2022.

International Omnipod

International Omnipod revenue for the three months ended September 30, ~~2022 decreased $5.1~~2023 increased $13.4 million, or ~~5.5%~~15.2%, to ~~$88.0~~$101.4 million, compared with ~~$93.1~~$88.0 million for the three months ended September 30, ~~2021.~~2022. Excluding the ~~14.4% unfavorable~~7.2% favorable impact of currency exchange, the remaining ~~8.9%~~8.0% increase in revenue was primarily due to higher volumes as we continue to expand awareness and access to Omnipod DASH and, to a lesser extent, product mix from the launch of Omnipod 5 in the U.K. These increases were partially offset by ~~increased~~higher attrition as we continue to be impacted by competition from AID ~~systems.~~systems and lower distributor orders.

International Omnipod revenue for the nine months ended September 30, ~~2022 decreased $1.8~~2023 increased $30.9 million, or ~~0.7%~~11.3%, to ~~$272.8~~$303.7 million, compared with ~~$274.6~~$272.8 million for the nine months ended September 30, ~~2021.~~2022. Excluding the ~~10.8% unfavorable~~0.3% favorable impact of currency exchange, the remaining ~~10.1%~~11.0% increase in revenue was primarily due to higher volumes as we continue to expand awareness and access to Omnipod DASH and, to a lesser extent, the timing of revenue recognition related to deferrals associated with our DASH MDC and a technology upgrade program, partially offset ~~by increased competition from AID systems.~~

~~For full year 2022,~~higher attrition as we ~~expect International Omnipod revenue~~continue to be ~~relatively level. The unfavorable impacts of currency exchange and~~ impacted by competition from AID systems ~~are expected~~and lower distributor orders.

For full year 2023, we expect higher International Omnipod revenue due to ~~be offset by~~ continued volume growth ~~and market penetration aided~~driven by the ongoing adoption of Om~~nipod~~Omnipod DASH, ~~throughout our international markets.~~and to a lesser extent, driven by new customers and conversions to Omnipod 5 in the U.K. and Germany. We expect these increases to be partially offset by competition from AID systems.

Drug Delivery

Drug Delivery revenue for the three months ended September 30, ~~2022 of $14.7~~2023 was $10.7 million ~~was relatively level~~ compared with ~~$15.3~~$14.7 million for the three months ended September 30, ~~2021~~2022. The $4.0 million decrease was driven by a lower forecast from our partner.

Drug Delivery revenue for the nine months ended September 30, ~~2022 of $54.2~~2023 decreased $27.0 million, ~~was relatively level~~or 49.8%, to $27.2 million, compared with ~~$55.5~~$54.2 million for the nine months ended September 30, ~~2021~~.2022. The decrease primarily resulted from a lower forecast from our partner, partially offset by a higher selling price. For full year ~~2022,~~2023, we expect Drug Delivery revenue to decline ~~as production levels were elevated during the pandemic.~~$26 million to $29 million due to a lower forecast from our partner, partially offset by a higher selling price.

Operating Expenses


		Three Months Ended September 30,									Three Months Ended September 30,
		2022				2021					2023				2022
(dollars in millions)	(dollars in millions)	Amount		Percent of Revenue		Amount		Percent of Revenue		(dollars in millions)	Amount		Percent of Revenue		Amount		Percent of Revenue
Cost of revenue	Cost of revenue	$	152.5	44.7	%	$	86.9	31.5	%	Cost of revenue	$	139.4	32.2	%	$	152.5	44.7	%
Research and development expenses	Research and development expenses	$	45.0	13.2	%	$	37.5	13.6	%	Research and development expenses	$	57.8	13.4	%	$	45.0	13.2	%
Selling, general and administrative expenses	Selling, general and administrative expenses	$	140.4	41.2	%	$	117.5	42.6	%	Selling, general and administrative expenses	$	180.7	41.8	%	$	140.4	41.2	%


		Nine Months Ended September 30,									Nine Months Ended September 30,
		2022				2021					2023				2022
(dollars in millions)	(dollars in millions)	Amount		Percent of Revenue		Amount		Percent of Revenue		(dollars in millions)	Amount		Percent of Revenue		Amount		Percent of Revenue
Cost of revenue	Cost of revenue	$	347.3	37.1	%	$	252.2	31.9	%	Cost of revenue	$	388.6	32.7	%	$	347.3	37.1	%
Research and development expenses	Research and development expenses	$	130.7	14.0	%	$	118.3	15.0	%	Research and development expenses	$	163.0	13.7	%	$	130.7	14.0	%
Selling, general and administrative expenses	Selling, general and administrative expenses	$	443.5	47.4	%	$	344.3	43.5	%	Selling, general and administrative expenses	$	522.1	44.0	%	$	443.5	47.4	%

Cost of Revenue

Cost of revenue for the three months ended September 30, ~~2022 increased $65.6~~2023 decreased $13.1 million, or ~~75.5%~~8.6%, to ~~$152.5~~$139.4 million, compared with ~~$86.9~~$152.5 million for the three months ended September 30, ~~2021.~~2022. Gross margin was 67.8% for the three months ended September 30, 2023, compared with 55.3% for the three months ended September 30, ~~2022, compared with 68.5% for the three months ended September 30, 2021.~~2022. The ~~13.2~~12.5 point ~~decrease~~increase in gross margin was primarily driven by a the $36.8 million charge ~~or 10.8 points,~~ associated with ~~the voluntary medical device correction notice we issued in October for~~ the Omnipod DASH PDM ~~relating to its battery.~~MDC notice issued in October 2022, which did not repeat in the current period. The ~~decrease~~increase was also driven by improved manufacturing efficiencies and higher average selling price due to growth in the pharmacy channel. These increases were partially offset by higher expected production costs ~~in the~~as U.S. as manufacturing continues to ramp and become a larger portion of our total production and increased costs associated with the manufacture of Drug Delivery pods. To a lesser extent, higher costs associated with Omnipod 5 production also contributed to the decline in margin. These decreases were partially offset by higher average selling price due to growth in the pharmacy channel.production.

Cost of revenue for the nine months ended September 30, 2022 increased $95.1 million, or 37.7%, to $347.3 million, compared with $252.2 million for the nine months ended September 30, 2021. Gross margin was 62.9% for the nine months ended September 30, 2022, compared with 68.1% for the nine months ended September 30, 2021. The 520 basis point decrease in gross margin was primarily driven by a $36.8 million charge, or 390 basis points, related to the voluntary medical device correction. The decrease was

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Cost of revenue for the nine months ended September 30, 2023 increased $41.3 million, or 11.9%, to $388.6 million, compared with $347.3 million for the nine months ended September 30, 2022. Gross margin was 67.3% for the nine months ended September 30, 2023, compared with 62.9% for the nine months ended September 30, 2022. The 440 basis point increase in gross margin was primarily driven by the $36.8 million charge associated with the Omnipod DASH PDM MDC notice issued in October 2022, which did not repeat in the current period. The increase was also driven by higher expected production costs in the U.S. as manufacturing continues to ramp and become a larger portion of our total production. To a lesser extent higher costs associated with Omnipod 5 production contributed to the decline in margin. These decreases were partially offset by higher average selling price due to growth in the pharmacy ~~channel and improved~~channel. These increases were partially offset by higher costs associated with Omnipod 5 production, higher expected production costs as U.S. manufacturing ~~efficiencies.~~continues to become a larger portion of total production.

For full year ~~2022,~~2023, we expect gross margin to be in the range of ~~63%~~66% to ~~64%, including the $36.8 million charge related to the voluntary medical device correction.~~67%. We anticipate gross margin to increase from 61.7% in 2022 due to significant costs associated with the MDCs in 2022, which we do not expect to recur, higher volume in the pharmacy channel and favorable geographical sales mix and manufacturing efficiencies. We believe these increases will ~~also~~ be ~~negatively impacted~~partially offset by higher production costs ~~in the~~as we further scale U.S. as manufacturing, ~~continues~~unfavorable product line mix due to ~~ramp and become a larger portion of our total production,~~ higher costs associated with Omnipod 5 production, and ~~unfavorable product line mix from lower Drug Delivery revenue. We believe these~~ higher costs ~~will be partially offset by increased volume in the pharmacy channel and improved manufacturing efficiencies.~~as we contend with inflation.

Research and Development Expenses

Research and development expenses for the three months ended September 30, ~~2022~~2023 increased ~~$7.5~~$12.8 million, or ~~20.0%~~28.4%, to ~~$45.0~~$57.8 million, compared with ~~$37.5~~$45.0 million for the three months ended September 30, ~~2021.~~2022. Research and development expenses for the nine months ended September 30, 2023 increased $32.3 million, or 24.7%, to $163.0 million, compared with $130.7 million for the nine months ended September 30, 2022. The ~~increase was~~increases for both the three and nine months ended September 30, 2023 were primarily due to year-over-year headcount additions to support our continued investment in the development of Omnipod products.

Research and development expenses for the nine months ended September 30, 2022 increased $12.4 million, or 10.5%, to $130.7 million, compared with $118.3 million for the nine months ended September 30, 2021. The increase was primarily due to year-over-year headcount additions to support our continued investment in development of Omnipod products, partially offset by lower outside services used for clinical activities. We expect research and development spending ~~in 2022~~for the full year 2023 to increase compared with ~~2021~~2022 as we continue to invest in advancing our innovation and ~~contend with inflation.~~clinical pipeline.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, ~~2022~~2023 increased ~~$22.9~~$40.3 million, or ~~19.5%~~28.7%, to ~~$140.4~~$180.7 million, compared with ~~$117.5~~$140.4 million for the three months ended September 30, ~~2021.~~2022. Selling general and administrative expenses for the nine months ended September 30, 2023 increased $78.6 million, or 17.7%, to $522.1 million, compared with $443.5 million for the nine months ended September 30, 2022. The ~~increase was~~increases for both the three and nine months ended September 30, 2023 were primarily attributable to year-over-year headcount additions, mainly to support information technology, international growth and commercial operations, higher third-party customer service costs to support Omnipod 5 adoption, and an increase in software license fees driven by investments in new systems due to our growing business and increased headcount. To a lesser extent, the increase was due to higher consulting costs, third-party training costs and higher amortization of cloud computing implementation ~~costs, and higher travel and entertainment expenses due to increased activity as COVID-19 restrictions have lifted.~~costs. These increases were partially offset by ~~lower litigation costs during the quarter compared to prior year.~~

Selling general and administrative expenses for the nine months ended September 30, 2022 increased $99.2 million, or 28.8%, to $443.5 million, compared with $344.3 million for the nine months ended September 30, 2021. ~~The increase was primarily~~ ~~attributable to year-over-year headcount additions, mainly to support information technology and commercial operations and~~ $27.3 million of legal costs related to the settlement of a patent infringement lawsuit, associated legal fees, and an estimated liability to settle a contract ~~dispute. To a lesser extent, these increases were due to higher travel and entertainment expenses due to increased activity as COVID-19 restrictions have lifted, an increase~~dispute in ~~investments to expand market acceptance and access to~~ the Omnipod, and higher amortization of cloud computing implementation costs. Additionally, selling, general and administrative expenses include $3.4 million of costs associated with the retirement and advisory services of our former chief executive officer.prior year.

We expect selling, general and administrative expenses to increase in ~~2022~~2023 compared with ~~2021~~2022 primarily due to investments in our ~~sales~~operating structure, primarily headcount additions, to facilitate continued growth, including customer support and ~~marketing efforts,~~a new enterprise resource planning system. Additionally, we plan to make additional investments to support the Omnipod System, including market acceptance and access, and the phased launch of Omnipod 5.5 in our international markets. We expect these increases to be partially offset by $25.2 million of legal charges incurred in 2022, related to the settlement of patent infringement lawsuit, associated legal fees, and the settlement of a contract dispute, that are not expected to recur.

Non-Operating Items

Interest Expense ~~Net~~

~~Net~~Interest expense for the three months ended September 30, 2023 was $10.4 million, compared with $9.2 million for the three months ended September 30, 2022. Interest expense for the nine months ended September 30, 2023 was $29.5 million, compared with $27.3 million for the nine months ended September 30, 2022. Interest expense primarily relates to interest ~~expense decreased $9.5~~incurred on our outstanding borrowings, net of our interest rate swaps.

Interest Income

Interest income for the three months ended September 30, 2023 increased $6.2 million to ~~$6.8~~$8.6 million, compared with $2.4 million for the three months ended September 30, 2022. Interest income for the nine months ended September 30, 2023 increased $19.1 million to $22.4 million, compared with $3.3 million for the nine months ended September 30, 2022. The increases for both the three and nine months ended September 30, 2023 were primarily driven by higher interest rates.

Income Tax Expense

Income tax expense was $1.8 million for the three months ended September 30, 2023, compared with an income tax benefit of $0.5 million for the three months ended September 30, 2022, ~~compared with $16.3 million for the three months ended September 30, 2021. This decrease~~resulting in effective tax rates of 3.4% and 9%, respectively. Income tax expense was ~~primarily driven by the adoption of Accounting Standards Update 2020-06,~~ ~~Accounting for Convertible Debt Instruments and Contracts in an Entity's Own Equity~~ ~~(“ASU 2020-06”), which eliminated most of the non-cash interest expense associated with our convertible notes. Refer to~~ ~~Recently Adopted Accounting Standard~~ ~~in Note1 to the consolidated financial statements for additional information.~~

~~Net interest expense decreased $22.1 million to $24.0~~$3.8 million for the nine months ended September 30, ~~2022,~~2023, compared with ~~$46.1~~an income tax benefit of $0.1 million for the ~~nine months ended September 30, 2021. This decrease was primarily driven by the adoption of ASU 2020-06 as discussed above.~~

~~Loss on Extinguishment of Debt~~

During the three months ended September 30, 2021, we incurred a $1.5 million loss on extinguishment of debt related to the conversion of a portion of our 1.375% Notes. During the nine months ended September 30, 2021, we incurred a $41.6 million loss on extinguishment of debt related to the repurchase and conversion of a portion of our 1.375% Notes.

~~Other Expense, Net~~

Other expense net increased $1.1 million to $1.8 million for three months ended September 30, 2022, compared with $0.7 million for the three months ended September 30, 2021. The increase was primarily driven by net realized foreign currency losses.

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~~Other expense net increased $1.1 million to $2.6 million for the~~ nine months ended September 30, 2022, ~~compared with $1.5 million for the nine months ended September 30, 2021. The increase was primarily driven by net realized foreign currency losses.~~

~~Income Tax Benefit (Expense)~~

~~Income tax benefit was $0.5 million for the three months ended September 30, 2022, compared with income tax expense of $2.6 million for the three months ended September 30, 2021,~~ resulting in effective tax rates of ~~9.0%~~3.6% and ~~16.9%~~0.7%, respectively. The ~~decrease~~changes in the effective tax rates ~~was primarily driven by~~for both the ~~jurisdictional distribution of profits~~three and ~~losses.~~

~~Income tax benefit was $0.1 million for the~~ nine months ended September 30, 2022, compared with an income tax benefit of $0.5 million for the nine months ended September 30, 2021, resulting in effective tax rates of 0.7% and 4.4%, respectively. The decrease in the effective tax rates was2023 were primarily driven by ~~the~~ jurisdictional distribution of profits and losses.

Adjusted EBITDA

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022		2023		2022
Net (loss) income		$	(5.2)	$	12.6	$	(12.4)	$	(12.4)
Net income (loss)										Net income (loss)	$	51.9	$	(5.2)	$	103.0	$	(12.4)
Interest expense, net	Interest expense, net	6.8		16.3		24.0		46.1		Interest expense, net	1.8		6.8		7.1		24.0
Income tax (benefit) expense		(0.5)		2.6		(0.1)		(0.5)
Income tax (expense) benefit										Income tax (expense) benefit	1.8		(0.5)		3.8		(0.1)
Depreciation and amortization	Depreciation and amortization	15.9		14.5		47.0		42.5		Depreciation and amortization	18.7		15.9		54.0		47.0
Stock-based compensation	Stock-based compensation	9.0		8.2		27.4		25.8		Stock-based compensation	10.5		9.0		35.7		27.4
Voluntary medical device correction (1)		36.8		—		36.8		��
Voluntary MDCs (1)										Voluntary MDCs (1)	(1.9)		36.8		(10.7)		36.8
Legal costs (2)	Legal costs (2)	—		—		27.3		—		Legal costs (2)	—		—		—		27.3
CEO transition costs (3)	CEO transition costs (3)	—		—		3.4		—		CEO transition costs (3)	—		—		—		3.4
Loss on extinguishment of debt		—		1.5		—		41.6
Adjusted EBITDA	Adjusted EBITDA	$	62.8	$	55.7	$	153.4	$	143.1	Adjusted EBITDA	$	82.8	$	62.8	$	192.9	$	153.4


(1) Represents ~~total~~(income) expense resulting from estimated costs associated with the voluntary ~~medical device correction~~MDC notices issued in ~~October~~the fourth quarter of 2022 and adjustments to ~~replace Omnipod DASH PDMs, all of~~those costs recorded in 2023, which ~~are~~is included in cost of revenue. Refer to Note 98 to the consolidated financial statements for additional information.
(2)Includes a $20.0 million charge ~~in the second quarter of 2022~~ to settle patent infringement litigation with Roche Diabetes Care, Inc., associated legal fees, and an estimated liability to settle a contract dispute. Refer to Note 12 to the consolidated financial statements for additional information.
(3)Represents costs ~~in the second quarter of 2022~~ associated with the retirement and advisory services of ~~the~~our former chief executive officer, including $2.3 million of accelerated stock-based compensation expense.

Non-GAAP Financial Measures

Management uses the following non-GAAP financial measures:

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 (loss) plus net interest expense, income tax expense, ~~(benefit),~~ depreciation and amortization, stock-based compensation and other significant transactions or events, such as legal settlements, ~~and~~ medical device corrections, and loss on extinguishment of debt, that affect the period-to-period comparability of our ~~operating~~ performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our ~~operating~~ performance, and we believe that it is helpful to investors, and other interested parties as a measure of our comparative ~~operating~~ 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.

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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:


(in millions)	September 30, 2023			December 31, 2022
Cash and cash equivalents	$	685.4		$	674.7
Current portion of long-term debt	$	49.8		$	27.5
Long-term debt, net	$	1,370.6		$	1,374.3
Total debt, net	$	1,420.4		$	1,401.8
Total stockholders’ equity	$	607.5		$	476.4
Debt-to-total capital ratio	70		%	75		%
Net debt-to-total capital ratio	36		%	39		%

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 September 30, ~~2022, we had $722.0 million~~2023, the following notes were outstanding:


Issuance Date	Coupon	Principal Outstanding (in millions)		Due Date	Conversion Rate (1)	Conversion Price per Share of Common Stock
September 2019	0.375%	$	800.0	September 2026	4.4105	$	226.73

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

Additional information regarding our debt is provided in ~~cash and cash equivalents. Additionally, we~~Note 10 to the consolidated financial statements.

Credit Agreement

We have a ~~$70.0~~$300.0 million three-year senior secured revolving credit facility (the “Credit Facility”), which expires in ~~2024.~~2028. At September 30, ~~2022,~~2023, no amount was outstanding under the Credit Facility. The Credit Facility contains a covenant to maintain a specified leverage ratio under certain conditions when there are amounts outstanding under the facility. It also contains other customary covenants, none of which are considered restrictive to our operations. ~~We believe that our current liquidity will be sufficient to meet our projected operating, investing and debt service requirements for at least the next twelve months.~~

~~Debt~~

To finance our operations and global expansion, we have periodically issued convertible senior notes, which are convertible into our common stock. As of September 30, 2022, the following notes were outstanding:

Issuance Date Coupon Principal Outstanding
(in millions) Due Date
Conversion Rate (1)
Conversion Price per Share of Common Stock
September 2019 0.375% $ 800.0 September 2026 4.4105 $ 226.73

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

~~Additional information regarding our debt is provided in Note 10 to the consolidated financial statements.~~

Summary of Cash Flows


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		(in millions)	2023		2022
Cash provided by (used in):	Cash provided by (used in):					Cash provided by (used in):
Operating activities	Operating activities	$	68.3	$	(42.6)	Operating activities	$	100.5	$	68.3
Investing activities	Investing activities	(102.7)		(46.3)		Investing activities	(87.8)		(102.7)
Financing activities	Financing activities	(25.8)		42.2		Financing activities	(15.8)		(25.8)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(9.1)		(3.9)		Effect of exchange rate changes on cash	(1.2)		(9.1)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	$	(69.3)	$	(50.6)	Net decrease in cash, cash equivalents and restricted cash	$	(4.3)	$	(69.3)

Operating Activities

Net cash provided by operating activities of ~~$68.3~~$100.5 million for the nine months ended September 30, ~~2022~~2023 was primarily attributable to $98.7 million working capital cash outflow, partially offset by net ~~loss,~~income, as adjusted for depreciation and amortization, and stock-based compensation ~~expense and non-cash interest expense, partially offset by a $4.5 million working capital cash outflow.~~expense. The working capital outflow was driven by a ~~$50.8~~$67.3 million increase in accounts receivable, a ~~$34.5~~$65.3 million increase in inventories and a ~~$32.1~~$24.5 million increase in prepaid expenses and other assets, partially offset by ~~an $89.6~~a $41.5 million increase in accounts payable and a $16.9 million increase in accrued expenses and other ~~liabilities and a $23.3 million increase in accounts payable.~~liabilities. The increase in accounts receivable was primarily due to an increase in sales in the U.S. pharmacy channel, which has longer payment terms. The increase in inventories was primarily driven by a planned inventory ~~build.~~build to mitigate supply chain risk and prepare for the broader launch of Omnipod 5 internationally and Omnipod Go in the United States. The increase in prepaid expenses and other assets was driven by ~~the capitalization of~~an increase in prepaid raw materials, cloud computing implementation and upgrade costs, and ~~new right-of-use assets.~~other receivables. The increase in accrued expenses and other liabilities was primarily driven by a $36.8 million estimated liability accrued during the quarter related to the voluntary medical device correction and a $30.7 million increase in rebates due to growth in the pharmacy channel and the launch of Omnipod 5. Finally, the increase in accounts payable was primarily driven by the timing of payments. Finally, the increase in accrued expenses and other liabilities was primarily driven by

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an increase in accrued rebates mainly due to revenue growth in the pharmacy channel, partially offset by warranty fulfillment associated with the voluntary MDCs issued in 2022.

Investing Activities

Net cash used in investing activities was $87.8 million for the nine months ended September 30, 2023, compared with $102.7 million for the nine months ended September 30, ~~2022, compared with net cash used in investing activities of~~2022.

Capital Spending—Capital expenditures were $46.3 million and $58.5 million for the nine months ended September 30, ~~2021.~~

~~Capital Spending—Capital expenditures were $58.5 million~~2023 and ~~$80.1 million for the nine months ended September 30,~~ 2022, and ~~2021, respectively. The $21.6 million decrease was~~ primarily ~~driven by less spend on manufacturing equipment, due~~related to the ~~addition~~purchase of equipment to increase our manufacturing ~~capacity in the prior year.~~capacity. We expect capital expenditures for 2023 to decrease compared with 2022 given our significant investments to ~~remain relatively level with 2021 as we continue to invest~~build capacity in 2022, including the acceleration of some of our ~~global manufacturing capabilities to support~~spending on machinery and equipment for our ~~growth.~~new Malaysia facility that is under construction. We expect to fund our capital expenditures using existing cash.

~~Purchases and Sales of Marketable Securities~~Investments in Developed Software—~~The $39.5 million decrease~~Investments in ~~cash receipts from maturities of marketable securities was driven by the prior year shift of a portion of our investment portfolio to investments classified as cash equivalents.~~

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~~Acquisition of Intangible Assets—Intangible asset acquisitions~~developed software were ~~$10.4~~$6.2 million and ~~$5.7~~$10.4 million for the nine months ended September 30, 2023 and 2022, respectively, and ~~2021, respectively. The $4.7 million increase was~~ primarily ~~driven by additional~~related to investments in ~~internal-use software projects.~~projects to support our cloud-based capabilities.

~~Acquisition and Investments~~Acquisitions—During the nine months ended September 30, 2023, we paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based AID technologies. During the nine months ended September 30, 2022, we paid $26.0 million to acquire of substantially all the assets related to the manufacture and production of ~~SMA~~shape-memory alloy wire assemblies that are used in the production of Omnipods from Dynalloy, Inc. ~~In addition,~~The remaining $3.0 million purchase price for this acquisition was paid during the nine months ended September 30, 2023.

Investments—During the nine months ended September 30, 2023 and 2022, we ~~paid $7.8 million for~~made strategic investments in ~~two~~ private ~~companies.~~companies in the amount of $7.2 million and $7.8 million, respectively.

Financing Activities

~~We had $25.8 million of net~~Net cash used in financing activities was $15.8 million for the nine months ended September 30, ~~2022,~~2023, compared with ~~$42.2~~$25.8 million ~~cash provided by financing activities~~ for nine months ended September 30, ~~2021.~~2022.

Debt ~~Issuance and~~ Repayments—During the nine months ended September 30, ~~2022,~~2023, we made ~~$18.3~~$20.3 million in aggregate principal payments on our equipment financings, ~~mortgage, and~~ term loan, and mortgage, compared with ~~$12.4~~$18.3 million for the nine months ended September 30, 2021. The $5.9 million increase is due to entering the term loan and an additional equipment financing in the second and third quarter of 2021, respectively. During the nine months ended September 30, 2021, we received net proceeds of $489.5 million from the issuance of the term loan and used $460.8 million of cash to partially fund the repurchase of a portion of our 1.375% Notes. In addition, we received net proceeds of $43.1 million from an equipment financing transaction.2022.

Proceeds from Option Exercises and Shares Issued Under Employee Stock Purchase Plan ~~Proceeds—~~(“ESPP”)—Total proceeds from option exercises and issuance of ~~employee stock purchase plan~~ shares under the ESPP were ~~$9.2~~$17.9 million and ~~$14.4~~$9.2 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~$5.2~~$8.7 million ~~decrease~~increase was primarily driven by option exercises ~~in the prior year~~ by ~~our~~ former ~~chief executive officer who retired in 2018.~~executives.

Payment of Taxes for Restricted Stock Net Settlements—Payments for taxes related to net restricted and performance stock unit settlements were ~~$16.7~~$13.1 million and ~~$27.6~~$16.7 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~$10.9~~$3.6 million decrease was primarily driven by ~~vesting~~lower achievement of the performance stock units ~~in the prior year by our former chief executive officer who retired in 2018.~~

~~Commitments and Contingencies~~

We are engaged in negotiations over a contractual dispute involving in-licensed intellectual property. Offers to settle the dispute have been made by both parties ranging from $5.7 million to $36 million. In connection with discussions to resolve this matter,that vested during the nine months ended September 30, 2022, we accrued an estimated liability of $5.7 million. The ultimate resolution of this matter is uncertain and could have a material effect on our results of operations.period.

Legal Proceedings

The significant estimates and judgments related to establishing litigation reserves are discussed under “Legal Proceedings” in Note 12to the consolidated financial statements included in this Form 10-Q.

Off-Balance Sheet Arrangements

As of September 30, ~~2022,~~2023, we had various letters of credit totaling ~~$1.6~~$16.9 million, ~~none of which is individually significant.~~

~~In August 2022, the Company entered into a~~primarily related to amounts issued under our $20 million uncommitted letter of credit ~~facility. In October 2022, in conjunction with the execution of an agreement to acquire real estate in Malaysia, including land and building, a letter of credit of $16.1 million was issued under this~~ facility to backstop a bank guarantee ~~for the same amount. The bank guarantee~~that serves as security for ~~the~~land and building in Malaysia while under construction. ~~Additional information regarding our debt is provided in Note 18 to the consolidated financial statements.~~

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 and contingencies 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, ~~2021, except as described below.~~

2022.

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~~Product Warranty~~

We provide a four-year warranty on our PDMs sold in the United States and Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications. We estimate our warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims. Warranty expense is recorded in cost of goods sold in the consolidated statements of operations. Costs to service the claims reflect the current product cost. Since we continue to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves. Changes to the actual replacement rates, which are evaluated quarterly, could have a material impact on our estimated warranty reserve.

In October 2022, we issued a voluntary medical device correction notice for the Omnipod DASH PDM related to its battery. In connection with this issue, we accrued a warranty reserve of $36.8 million, of which $10.5 million is based on replacing all Omnipod DASH PDMs older than 18 months. These older PDMs have an increased likelihood of experiencing a battery issue before we have an updated Omnipod DASH PDM ready to ship to all DASH customers. Changes to the number of Omnipod DASH PDMs replaced prior to the shipment of updated Omnipod DASH PDMs could have a material impact on our estimated warranty reserve related to this issue.

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:

•adverse changes in general economic conditions as well as risks associated with public health crises and pandemics, ~~such as the COVID-19 global pandemic,~~ government actions and restrictive measures implemented in response, supply chain disruptions, delays in clinical trials, and other impacts to the ~~business;~~business, our customers, suppliers, and employees;

•dependence on a principal product platform;

•ability to maintain and grow our customer ~~base,~~base;

•ability to scale our business to support revenue growth, maintain an effective sales force and expand our distribution network;

•ability to secure and retain adequate coverage or reimbursement from third-party payors;

•impact of healthcare reform laws;

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

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

•~~changes~~inability to maintain or ~~termination of our license to incorporate a blood glucose meter into the Omnipod System or inability to~~ enter into new license or other agreements with respect to ~~the Omnipod System’s~~CGMs, data management systems or other rights necessary to sell our current product and/or commercialize future ~~features;~~products;

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

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

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

•failure to retain key ~~suppliers and/or supplier pricing discounts and achieve satisfactory gross margins;~~suppliers;

•ability to protect our intellectual property and other proprietary rights and potential conflicts with the intellectual property of third parties;

•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 the Omnipod System or future products;

•failure of our contract manufacturer or component suppliers to comply with the FDA’s quality system regulations;

•potential adverse impacts resulting from a recall, or discovery of serious safety issues, product liability lawsuits relating to off-label use, the potential violation of anti-bribery/anti-corruption ~~laws, laws and regulations regarding privacy and data protection, and~~laws; breaches or failures of our product or information technology systems, including by cyberattack;

•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;

•the concentration of manufacturing operations and storage of inventory in a limited number of locations;

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•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 ~~any 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, ~~2021~~2022 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;

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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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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, ~~2021~~2022 for a discussion of our market price sensitive instruments and foreign currency exchange risk.

Item 4. Controls and Procedures

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 interim 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 September 30, ~~2022.~~2023. Based on the evaluation, our chief executive officer (principal executive officer) and interim chief financial officer (principal financial officer) concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Refer to the “Risks Factors” section in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 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.

Item 5. Other Information

~~None.~~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.

Item 6. Exhibits


Number						Description
10.1						Insulet Corporation Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10 .1 to our Registration Statement on Form S-8 ,filed on November 2, 2023).

~~31.1~~31.1*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.

~~31.2~~31.2*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.

32.1**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer and Chief Financial Officer.

101						The following materials from Insulet Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2022~~2023 formatted in iXBRL (Inline eXtensible Business Reporting Language), as follows:

						(i) Condensed Consolidated Balance Sheets (Unaudited) as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022

						(ii) Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

						(iii) Condensed Consolidated Statements of Comprehensive ~~(Loss)~~ Income (Unaudited) for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

						(iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

						(v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

						(vi) Condensed Notes (Unaudited) to Consolidated Financial Statements

*						Filed herewith.

**						Furnished herewith.

Table of Contents

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.


		INSULET CORPORATION (Registrant)

Date:	November ~~3, 2022~~2, 2023	/s/ James R. Hollingshead
		James R. Hollingshead
		Chief Executive Officer (Principal Executive Officer)



Date:	November ~~3, 2022~~2, 2023	/s/ ~~Wayde McMillan~~Lauren D. Budden
		~~Wayde McMillan~~Lauren D. Budden
		Interim Chief Financial Officer, Group Vice President, Chief Accounting Officer and Controller (duly authorized officer and Principal Financial and Accounting Officer)


(in millions)	As Reported Prior to ASU 2020-06		Adjustments		As Adjusted Under ASU 2020-06
	December 31, 2021		January 1, 2022		January 1, 2022
Long-term debt, net (1)	$	1,248.8	$	147.1	$	1,395.9
Additional paid-in-capital (2)	$	1,207.9	$	(207.7)	$	1,000.2
Accumulated deficit (3)	$	(649.5)	$	60.6	$	(588.9)


	Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021
(in millions)	Foreign Currency Translation Adjustment		Unrealized Gain on Available-for-sale Securities		Unrealized Loss on Cash Flow Hedges		Accumulated Other Comprehensive Income (Loss)		Foreign Currency Translation Adjustment		Unrealized Gain on Available-for-sale Securities		Unrealized Loss on Cash Flow Hedges		Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period	$	1.3	$	—	$	(0.6)	$	0.7	$	5.2	$	0.3	$	—	$	5.5
Other comprehensive loss before reclassifications	(4.4)		—		(0.3)		(4.7)		(8.3)		(0.3)		(1.2)		(9.8)
Amounts reclassified to net income (loss)	—		—		0.6		0.6		—		—		0.9		0.9
Balance at the end of period	$	(3.1)	$	—	$	(0.3)	$	(3.4)	$	(3.1)	$	—	$	(0.3)	$	(3.4)