Q1 2024 Tandem Diabetes Care Inc Earnings Call
Okay.
Speaker Change: Thank you for standing by welcome to tandem diabetes care first quarter 2020 for earnings at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been.
Speaker Change: Answered and you'd like to remove yourself from the queue simply press star one again.
Speaker Change: A reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Susan Morrison EVP and Chief administrative officer. Please go ahead.
Susan M. Morrison: Hello, everyone and thanks for joining tandem's first quarter 2024 earnings call.
Susan M. Morrison: As a reminder, today's discussion will include forward looking statements. These statements reflect management's expectations about future events, our product pipeline development timelines and financial performance and operating plans and speak only as of today's date, there are risks and uncertainties that could cause actual results to differ materially from.
Susan M. Morrison: Those anticipated or projected in our forward looking statements.
Susan M. Morrison: The factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is highlighted in our press release issued earlier today.
Susan M. Morrison: And under the risk factors portion and elsewhere in our most recent annual report on Form 10-K as updated by our most recent quarterly report on Form 10-Q.
Speaker Change: We assume no obligation to publicly update any forward looking statements, but there was a result of new information future events or other factors.
Speaker Change: Discussion will also include references to a number of GAAP and non-GAAP financial measures non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operations.
Speaker Change: We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods.
Any non-GAAP information presented should not be considered as a substitution independently or superior to results prepared in accordance with GAAP.
Speaker Change: Refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.
Speaker Change: Leading today's call is John Sheridan, Tandem's, President and CEO, who will be joined by leave Vossler, Our executive Vice President and Chief Financial Officer, I'll now turn the call over to John.
John F. Sheridan: Thanks, Susan and welcome everyone to our call today.
John F. Sheridan: 'twenty 'twenty four is off to an impressive start with a solid first quarter performance.
Speaker Change: We met key commercial milestones with the successful launch of multiple new products worldwide.
Speaker Change: We outperformed financially demonstrating a return to growth both in and outside the United States.
Operationally, we are continuing to evolve the organization for scalable growth.
Speaker Change: The investments in people processes and technology.
Speaker Change: We are laying the foundation for 2024 to be a transformational year for tandem much.
Speaker Change: Like when we launched our first automated insulin delivery algorithm approximately five years ago.
Speaker Change: There is growing excitement across our company as we deliver on our strategy to bring greater choice and benefits to people living with diabetes worldwide.
In the first quarter, we executed on expanding our robust portfolio of delivery devices that offer choice and sensor integration applications and data management tools.
Speaker Change: Beginning with hardware we marked another first for our company. This quarter. We are now the only manufacturer offering multiple insulin pump form factors.
Speaker Change: This multi platform approach as a value proposition that makes tandem unique.
We can provide people options and how they were and operate their AI systems, while benefiting from our number one rated control IQ technology.
But we took center stage this quarter being the first miniature durable pump that delivers unmatched wearability and the freedom to disconnect.
Speaker Change: We continue to hear an overwhelmingly positive response from early users.
Speaker Change: Feedback is consistent between people new to pump therapy, and those who are converting from competitive offerings.
Speaker Change: Our customers comment that they forget that they're wearing bogey how much they love the option to disconnect and that as a durable pump, it's more environmentally responsible than disposable devices.
Health care providers highlight the benefit of being able to use the pump button to deliver a bolus even when they are aware away from their phone.
Speaker Change: They also greatly appreciate the efficiency it provides our practices with wireless connectivity to tandem source, our cloud based data management platform.
Speaker Change: This type of positive feedback is incredible to here with mostly just getting started on the market. It's too early to draw conclusions on trends.
Speaker Change: Behavior in the first quarter is supportive of our research that <unk> provides an opportunity to expand the market while meaningful demand for T cell next two continues.
Another area of focus where we've demonstrated a competitive advantage is the speed to market with CGM integrations.
Speaker Change: As our CGM partners advance and drive adoption of sensor technology and increases the number of people who can benefit to <unk> systems.
Speaker Change: We've seen this over the years through four generations of decks com sensor technology and more recently with the U S launch of the T Slim with Abbott freestyle Libre two plus.
<unk> is currently available with <unk> <unk> sensor compatibility we.
We are on track to begin operating integration with <unk> seven later in the second quarter.
Speaker Change: Outside the U S. We began a successful rollout of the T cell next to with <unk> seven and are working to integrate both platforms with Abbott freestyle Libre three technology worldwide and the year ahead.
Speaker Change: The next area, where we've demonstrated innovation leadership is in algorithms.
Speaker Change: We're preparing for the rollout of enhancements to our number one rated control IQ technology.
Speaker Change: At the end of last year, we received FDA clearance to lower the age indication for control IQ to age two and above an expanded feature set with options for greater personalization.
Speaker Change: As a reminder, algorithms and pumps are separately indicated for age groups.
Speaker Change: The T slim pump as already indicated for age two and above and in the first quarter, we received FDA clearance to lower movies age indication to two and above.
Speaker Change: We are preparing to roll out the updated control IQ software on both of our pump platforms. Later this year.
Speaker Change: This is an exciting step in our plans to offer continuous improvements to our AI algorithms through software updates to our system.
Speaker Change: From a clinical perspective, we have numerous activities underway.
Speaker Change: Fully closed loop technology that is designed to improve clinical outcomes, while reducing the cognitive burden of diabetes management continues to be an important area of focus for us.
Speaker Change: We've also been making great progress on our clinical trials to support expanded control iq's indication to people living with type two diabetes and expect enrollment to be completed this month.
Speaker Change: In addition, we are advancing our extended wear infusion set technology and began clinical trial enrollment in the first quarter.
Speaker Change: Overall, our commitment to innovation and choice contributes to our customers' high satisfaction and loyalty along with our dedicated training and customer support reflected in our consistently strong renewal rates.
Speaker Change: As you can see the year is off to a strong start and we are well positioned to achieve our goals.
Speaker Change: I'd like to thank our employees from across the organization, whose diligent efforts made this possible and who continue to impress and inspire me.
Speaker Change: I would now like to turn the call over to Lee to discuss our Q1 results and updated sales expectations.
Lee: A reminder, unless otherwise noted many of the financial metrics I will be discussing today are on a non-GAAP basis for measures, where there are differences reconciliations from GAAP to non-GAAP results can be found in today's earnings release, which is available on the Investor Center portion of our website.
Speaker Change: We are kicking off 2024 are strong with a return to growth our worldwide sales in the first quarter grew 12% year over year to $193 million with well over half generated through recurring supply in renewal revenue streams from our loyal customer base.
Speaker Change: In the U S. It was an exciting quarter with our new product offerings, just beginning to take hold in the market and driving first quarter sales at $131 million on approximately 15000 pump shipments.
Speaker Change: Our renewals continue to grow double digits year over year with strong capture rates from a larger number of warranty expirations.
Speaker Change: Shipments to new customers continue to slightly exceed renewable purchases as expected this year within that new customer population, we began to see a shift in mix towards more people coming from MDI.
Speaker Change: The launch of movie in particular outperformed our expectations generating a high level of activity from both new and renewal customers in what is typically our lowest seasonal quarter of the year.
Speaker Change: Maybe with initially available in mid February to only our direct customers followed by our distribution network at the end of March.
Speaker Change: Saw benefit in the quarter from customers, who have been waiting for mobi availability since last year at the same time. We are also aware customers who are still waiting for the availability of the G. Seven integration.
Speaker Change: I would like to note that we will not be breaking out shipment details between pump platforms, nor by sensor integration.
Speaker Change: As a reminder, our tender movie customers to date made their purchasing decision independent of our Kingdom choice program.
Speaker Change: Please go next to customers who are eligible for this program has not yet made an election to participate.
Speaker Change: Look forward to operating this opportunity in the coming weeks.
Speaker Change: The accounting for tandem has complexity.
Speaker Change: Our deferral of sales for the program, which we report on a GAAP basis only ended with the availability of notes in February.
Speaker Change: Up to now we have recorded GAAP sales deferrals that have accumulated to $31 million.
Speaker Change: As eligible T slim users elect to switch to the mobile platform. We will begin to report the reversal of those deferrals in our GAAP financials only.
Speaker Change: This will not be included in our future reports of non-GAAP comp sales or shipments.
Speaker Change: Any additional fees received or costs incurred from the choice program will also only be in our GAAP financials non-GAAP sales will continue to exclude any impact of the tandem <unk> program, providing results that measure core operations as well as providing consistency for comparison with historical and future periods.
Speaker Change: Another highlight from our first quarter sales performance in the us with a meaningful price benefit we realized through the <unk> channel with improvement in average selling prices across all products from both price increases and favorable channel mix.
Speaker Change: Our success in securing higher reimbursement comes from a recognition by payers of the value that tandem and control IQ you bring to the health care systems.
Speaker Change: Simultaneously, we are very pleased with our progress as we pursue pharmacy channel access for mobi and look forward to providing future updates.
Speaker Change: Turning to markets outside the U S. Our sales grew more than 60% to $62 million on nearly 10000 pump shipments the.
Speaker Change: The large majority of our shipments are driven by market expansion and competitive conversions from the continued enthusiasm for our technology and the 25 countries, where we operate today.
Speaker Change: We have a growing opportunity from renewals at warranty from our earliest customers are beginning to expire but are still in the early stages of that cycle and do not anticipate meaningful contribution this year.
Speaker Change: This quarter, specifically benefited from the initial rollout of <unk> seven integration due to certain orders that shifted into 2024 from the fourth quarter of 2023.
Speaker Change: We also saw modest pricing favorability compared to our expectations from geographical mix and foreign currency gains.
Speaker Change: As a reminder, in 2023, we executed a distribution center transition in the first half of the year to create long term efficiency for our European operations.
Speaker Change: With that transition complete we expect to see reduced quarter to quarter variability in distributor orders more normalized asps.
Speaker Change: And closer alignment to pump market demand and customer supply ordering patterns.
Speaker Change: Moving on to margins the outperformance in sales drove higher gross and adjusted EBITDA margin gross.
Speaker Change: Gross margin was 50% this was in line with the prior year due to improvements in raw material costs and average selling prices, which combined to offset increased overhead per unit for scaling will be volume and less favorable product mix.
Speaker Change: Adjusted EBITDA improved nearly five percentage points year over year to negative 7%.
Speaker Change: <unk> expenses increased only 5% on 12% sales growth, which includes increased sales and marketing spend for all of our new product launches as well as higher clinical trial cost to support advancement of our product pipeline.
Speaker Change: These investments were in part funded through facility and employee related cost reduction initiatives in 2023 that continue to drive leverage today.
Speaker Change: From a balance sheet perspective, we took advantage of strong conditions in the convertible market to efficiently refinance existing convertible notes that were maturing in may 2025.
Speaker Change: Our total cash and investments were consistent with the end of the year at nearly $470 million.
Speaker Change: In all we are extremely pleased with our progress in the first quarter. As a result, we are increasing our 2024 sales guidance to approximately $868 million or 12% growth year over year based on our first quarter sales performance.
Speaker Change: This breaks down to $634 million in the U S and $234 million outside the U S.
Speaker Change: Remaining consistent with our approach to setting expectations at the beginning of the year. Our sales guidance is primarily based on recurring supply and renewable revenue streams, while we evaluate early purchasing behaviors for our new products as awareness credits.
Speaker Change: We are also giving consideration to the increasingly competitive environment outside the U S.
Speaker Change: We are optimistic about our opportunities in 2024, but not changing the remaining outlook until we are able to observe sustainable trends.
Speaker Change: From a profitability perspective, we are maintaining our full year guidance of 51% for gross margin and breakeven for adjusted EBITDA.
Speaker Change: There are many moving parts across the quarters. This year when considering the training and scale of product launches variation in the prior year baseline pumps and seasonality. Therefore, we will also provide a view into the second quarter.
Speaker Change: Our worldwide sales are anticipated to be $205 million for the quarter.
Speaker Change: In the U S sales are expected to grow to approximately $150 million, reflecting impacts from the timing of customer purchases for mobi. The G. Seven integration late in the second quarter.
Speaker Change: Sales outside the U S are estimated to be slightly lower than the first quarter at approximately $55 million due primarily to the timing of certain distributor orders received in the first quarter associated with the scaling launch a T Slim X two integration with <unk> seven.
Speaker Change: Gross margin in the second quarter is anticipated to be approximately 50% in line with the first quarter, while adjusted EBITDA is expected to improve to negative 5%.
Speaker Change: As sales grow and lobby volumes increase across the year, both margins are anticipated to improve with adjusted EBITDA margins and free cash flow returning to positive in the second half of 2024.
Speaker Change: As we look ahead the mobi system at scale is anticipated to be a key driver of long term margin improvement and we remain committed to achieving our long term goals of a 65% gross margin and 25% operating margin when we reach 1 million customers.
Speaker Change: We will now open up the call for questions operator.
Speaker Change: Certainly and as a reminder, ladies and gentlemen, we ask that you. Please limit yourself to one question and one follow up.
Speaker Change: And our first question comes from the line of Steve Richmond from Oppenheimer. Your question. Please.
Steven Michael Lichtman: Thank you hi, guys and congratulations on the quarter.
Steven Michael Lichtman: A number of places to historic here, but I guess.
Steven Michael Lichtman: First of all in terms of the initial feedback you're seeing from Ob and also in terms of what the split is I know it's early days between.
Steven Michael Lichtman: <unk> and T slim.
Steven Michael Lichtman: I'm, just trying to get a sense of.
Steven Michael Lichtman: How this is starting to sort of a portion out in the field.
Speaker Change: Hi, Steve.
Speaker Change: Say that what we're hearing is that <unk> is redefining wearability.
Steve: Small and first of all.
Steve: And its size as it may.
Steve: It makes it so that it's light and people forget they actually have it on and you can also disconnect the hep's they like it because of the.
Steve: Bolus button and.
Steve: And the performance of <unk> and they also appreciate the fact that.
Steve: The wireless data uploads automatically to source.
Speaker Change: And so we're obviously just getting started.
Steve: As we mentioned in the prepared remarks, we've absolutely achieved our commercial objectives.
Steve: And.
Steve: We're really excited about the rest of the year, particularly as we introduce the <unk> seven implementation in the spring.
Steve: It all comes and supports our our early research that movie is a market expander, because we have seen a growing number of MDI and competitive conversions interesting interested in the product. So it's been a great start and we're very excited about it.
Speaker Change: Thanks, and Lee you talked about pricing and coverage so.
Speaker Change: The implied price that we saw this quarter, which obviously did come in higher is that a good price to use in the U S for the remainder of the year and any color you can provide on your sort of initial discussions on pharmacy with Moby would be would be helpful. Thank you.
Speaker Change: Sure and yes.
Speaker Change: To the first part of the question on the average selling prices and as a good baseline to use for the remainder of the year and we're very proud of what our team has accomplished in terms of getting price increases when theyre talking to the payers on the D&A side.
Speaker Change: But to your question on the pharmacy side. We also have active conversations underway. So the whole team is extremely busy right now and <unk> is being well received.
Speaker Change: What I can say right now mostly is that we're happy to be passed the question of if we can move into the pharmacy channel now, it's just a matter of when.
Speaker Change: So we look forward to giving updates on that progress at a future date.
Speaker Change: Great. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah.
Speaker Change: And our next question comes from the line of Brooks O'neil from Lake Street Capital markets. Your question. Please.
Brooks O'neil: Thank you good afternoon I'm just.
Brooks O'neil: I wanted to be sure Lee that I understand your comments about the impact of tandem choice.
Brooks O'neil: And in particular was there any.
Brooks O'neil: Or what what if any revenue was recognized in Q1 that was essentially a deferral from Q4.
Speaker Change: And thanks for the question Brooks.
Speaker Change: Understanding that this is pretty convoluted and how this works, but what you think the way to think about it is from a non-GAAP basis, you won't see any impact from tandem choice, whether it's deferral of revenue or recognition of revenue associated with it.
Speaker Change: But on the GAAP side, what happened was when <unk> became available eligibility ceased for people who were buying some pumps and so at that point Theyre able to go ahead and pick <unk> when they purchased their pumps. So deferrals have stopped and we accumulated $31 million in deferrals over the whole time period when people start to make their election.
Speaker Change: To switch, which will start in the coming weeks, we will start to recognize those reversals will recognize any fees that we receive and the cost to deliver the pump, but again only in the GAAP financials. So the non-GAAP financials will be I'll say untainted by that program.
Speaker Change: Okay, I'm not sure I understand it all but thats probably normal for me so I'll figure it out.
Speaker Change: Tonight.
Speaker Change: Appreciate those comments very much no. We're excited about <unk> I know we're excited about the sensor integrations. Let me just wanted to jump ahead and see if you have any updated comments on X three siggi better AI <unk>.
Speaker Change: While we retool Bliss.
Speaker Change: When do you think we might begin to hear more about those and how is the progress coming.
Speaker Change: Brooks I think at our last call. What we said is we're not going to we're going to refrain from talking about dates on those products.
Speaker Change: The longer for competitive reasons, but I will say that we're very happy with the progress and we remain really excited about.
Speaker Change: With a commitment to the roadmap and I think that Theres really no change in our expectations from these products at this point in time. So the team is doing a great job. We're working very hard on these things and we're going to bring them to market as quickly as quickly as we can.
Speaker Change: Totally makes sense. Thank you very much and congratulations on a terrific start to the year.
Speaker Change: Thanks Brooks Thanks Brooks.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Mike <unk>.
Mike: From Leerink partners your question please.
Mike: Yes, hi, everyone. Thanks for taking our questions.
Mike: So a couple of months into the movie launch can you just help us quantify what portion of the new starts and once you overall came from <unk> and how that aligned.
Speaker Change: Anecdotally just with your own expectations and then as.
Mike: As you've gotten into <unk>.
Mike: Again, maybe even just qualitatively how thats kind of track.
Mike: Okay.
Speaker Change: Sure. Thanks for the question.
Speaker Change: When it comes to mobile and its share first of all I'll start by saying it was available to a limited population in the first quarter, we didn't launch it until middle of February and we also started with just our direct customers and so it was scaling up across the quarter and on into the second quarter.
Speaker Change: It did exceed our expectations in terms of the uptake that we saw this first quarter and it was I would say, Turkey, both with new customers and renewal customers and as John mentioned, a few moments ago very much in line with our market research.
Speaker Change: What we're seeing from a demographic perspective.
Speaker Change: We're not providing any specific level of detail about the actual number of units but.
Speaker Change: Needless to say, we're very excited about the opportunity that is for new for us.
Speaker Change: Yeah understood. Thanks, and then maybe just a quick follow up in terms of the guidance. You've provided can you just confirm that that really isn't building in any additional credit for mobile in the second quarter, just based on the step up.
Speaker Change: Correct and so it's the same philosophy that we started off the year with in that we are basing the guidance, mostly on the renewal opportunity that already existed which is a nice growth.
Speaker Change: Because just the number of warranty expirations. This year alone is stepping up more than 30% from last year also its predicated on the continuing supply sales across the year.
Speaker Change: When we thought about new pampers, and we thought about it from the perspective of we could deliver as many as we did last year now obviously, we've taken into consideration BH over achievement in the first quarter, but for the remainder of the year. It's back to those baseline expectation of what we want to see are some sustainable trends right now we're really data points we have.
Speaker Change: And even draw the line on those yet much less developed a trend. So we will continue to evaluate that in the coming quarters before we start factoring in any incremental.
Speaker Change: Sales that come from those new products.
Speaker Change: Understood Thanks very much.
Speaker Change: Alright. Thank you. Thank you.
Speaker Change: For our next question.
Speaker Change: And our next question comes from the line of Matthew Blackman from Stifel. Your question. Please.
Mathew Justin Blackman: Good afternoon, everybody can you hear me okay.
Mathew Justin Blackman: And by doing that but go.
Speaker Change: John Thanks.
Mathew Justin Blackman: I just going to ask more directly here.
Mathew Justin Blackman: Hoping you could give some indication of <unk>, new patient growth if not precision simply I mean, it does seem like there was new patient growth, but you also did have a price lift just any indications you can give us on at least the first quarter, whether you saw new patient growth and if you want to give us a magnitude.
Speaker Change: Wouldn't mind that either.
Speaker Change: And then the follow up question.
Speaker Change: Through it all out there at once.
Speaker Change: About the P&L, but I think the one number that sort of stuck.
Speaker Change: <unk> stood out to US was the SG&A number being less intense than we're modeling I think we were anticipating stepped up spend for these new launches.
Speaker Change: Just a timing item or is this sort of low $90 million, obviously with a different cadence throughout the rest of the year, but is this sort of the right.
Speaker Change: Starting point or is there is there more incremental spend to come as as you continue to rollout these new products. Thanks.
Speaker Change: Sure I'll start and go back to the first question, which was new patient growth and I'm going to speak to it in context of our pump shipments in the first quarter in the U S and the information that we're able to share is that we did see new pump starts continue to exceed renewable pumps and so when you look at the split of new versus renewal new pumps for slightly above.
Speaker Change: Renewables.
Speaker Change: Within that new pump population.
Speaker Change: We've often discussed where they are coming from and it usually has been a split of about 50 50 between the MDI conversions and the competitive conversions.
Speaker Change: This year, we expect it to begin to see a shift more towards MDI, which makes a lot of sense considering that population is so much larger than all of our new products are really pointed towards meeting the needs of people, who haven't chosen pump therapy before so in the first quarter. We did start to see a slight shift in the MDI starting to outpace the growth in competitive.
Speaker Change: Conversion, so everything was as expected and we're really excited about how the quarter played out.
Speaker Change: Nothing really unusual to report there.
Speaker Change: Then turning to your second question looking at SG&A and so we did make investments in sales and marketing in particular thinking about the field, we had our global commercial meeting in the first quarter and really talked about the launch of the products. We also amped up our marketing spend.
Speaker Change: And the reason you'd probably don't see it increase as much as some of the investments actually did it because we continue to have cost efficiency programs in place, where we really focused on our customer service activities and a lot of automation and process improvement and leaning out some of those processes and so those are programs that we implemented last year are really starting to show there.
Speaker Change: Leverage and they are allowing us to make more investments without growing operating expenses in total so much overall.
Speaker Change: No that's really helpful. I appreciate all the color.
Speaker Change: Thanks, Matt.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Chris <unk> from Nephron Research. Your question. Please.
Chris: Thanks, and congrats on the quarter guys.
Chris: I wanted to follow up on the pricing commentary specifically.
Chris: Yes, I think you had talked about $2300 being the right place for the year. There. It was higher in the first quarter closer to what we saw in 2003. So I just wanted to double check is 23, where you think things shake out.
Speaker Change: Sure. So excuse me so 2023 in the first quarter in particular was unusually high from a pump perspective that was back when we were undergoing the transition to our new European distribution Center. So we didn't have a natural mix of all of our distributor customers ordering in that quarter and this.
Speaker Change: This quarter it was I would say a little more normalized.
Speaker Change: And we expected that Asps could look something like they did prior to the transition which was more like $2300 Mark.
Speaker Change: Next was a little bit more favorable to us this time as well as we had some slight very modest foreign currency benefit there, but otherwise I would say for now continue to think of the $2300 is a good baseline and then we will continue to discuss anything for Dolby to that across the year.
Speaker Change: Okay. Thanks, and then John I know, we've barely gotten the first iteration of <unk> out of the gate here, but you've highlighted flexibility of this platform is a big selling point in its current incarnation. So I'm curious whether the feedback you've gotten so far makes you think any differently about the need to offer a true tubular.
John F. Sheridan: This configuration of this product if theres enough daylight between what <unk> got now and what you were thinking about what that to those chassis to really make it additive.
John F. Sheridan: Yes, I mean, I think that Youre right. We are very excited about the feedback we've gotten so far but we do believe having a two bliss.
Speaker Change: Version of <unk> will only drive additional demand for the product and so we absolutely intend to continue to develop it.
Speaker Change: I can tell you that we've got.
Speaker Change: We've made a lot of good progress and it looks awesome and I think that.
Speaker Change: People when they see it and understand what it is going to do it just it just gives people to the full opportunity to where it <unk> anywhere they like so very excited about it we definitely continue to invest and develop it.
Speaker Change: Great. Thanks.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Matthew O'brien from Piper Sandler Your question. Please.
Matthew Stephan Miksic: Afternoon, Thanks for taking the questions maybe John for starters the call.
Matthew Stephan Miksic: Comments, you made about <unk> and expanding the market, but that was interesting just given what we've seen with <unk> five in this space.
Matthew Stephan Miksic: Where do you think you guys are expanding the market and are you is it more head to head with <unk> five in terms of maybe pediatric patients or something along those lines or is it something completely different where just a group of patients.
Matthew Stephan Miksic: <unk> said historically wanted something with tubing with maybe better algo and a better form factor that you are able to access now with it you couldnt before.
Speaker Change: Yes, I think it's a little bit early for us to actually start to talk about specific groups that are are beginning to use the product.
Speaker Change: What we can say is that.
Speaker Change: There is over the last 18 months certainly.
Speaker Change: <unk> has taken more of the MDI starts than we have at <unk>.
Speaker Change: Historically, I think what what what we believe <unk> is going to do it's going to help us return to where we were and maybe we don't get all the way back to a 50 50 split, but we certainly think that we're going to take more of the MDI starts that we have over the last 18 months and I think the early data suggests that and I think that what we're hearing is that people.
Speaker Change: The physicians that are actually prescribing it.
Speaker Change: They believe that they've got an option to <unk> five now they've got something that can show people.
Speaker Change: Actually has roughly the same form factor and has a lot of advantages and hasnt really good algorithm. So I think what we have the T slim out there it was accomplished.
Speaker Change: Accomplished.
Speaker Change: Was difficult, but with T.
Speaker Change: Moving now in the market I think they've got something that stands up very strongly again.
Speaker Change: And I think that as we get down the toothless version, it's even better.
Speaker Change: Understood. Thanks for that and then the follow up is just I know, it's early and I don't want numbers, but.
Speaker Change: Just the feedback or interest level from Abbott freestyle users in terms of starting on T Slim and.
Speaker Change: Is it something that.
Speaker Change: Youre starting to see a little bit of traction in or do you need all three before you start to really access that patient population.
Speaker Change: Yes, I mean, I'll say that first of all we're really excited about the integration with <unk>.
Speaker Change: First I would break too.
Speaker Change: The U S and we're now working on freestyle Libre III for U S. O U S. In both T Slim <unk>.
Speaker Change: It's early in the launch process, we've certainly seen uptake.
Speaker Change: And we've talked to a number of people who have used who are currently using the freestyle centers and there are definitely a lot of people who are what we call near term buffers people, who are interested in the product and interested in the benefits of an AI system.
Speaker Change: It's really it's a different situation that's a market development opportunity, it's a new market and we'd have to work with with Abbott to development, which includes training and marketing in informing our customers in hcp's on the benefits.
Speaker Change: It's early but the work is underway and I think we're really excited about the partnership and I think there is going to have a meaningful long term impact on our our growth as a business.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Larry <unk> from Wells Fargo. Your question. Please.
Larry: Hi, good afternoon, thanks for taking the question.
Larry: Lee I wanted to ask first about international we typically don't see Q2 sales below Q1. So how much was shifted from Q4 of last year into Q1 of this year.
Larry: <unk> shipped 45000 pumps internationally in 2021 and 2022 is there any reason you can't achieve at least that this year given you're starting to see some benefit from renewals and I had one follow up.
Speaker Change: Sure so from that perspective, we didn't quantify it specifically, but.
Speaker Change: Pointing to the fact that we are guiding to a step down from Q1, you can kind of get an idea of.
Speaker Change: How much those shifted orders I guess I would say, we're valued and so what we saw our one large distributor in particular and a few others moved orders from the fourth quarter into the first quarter of this year.
Speaker Change: Waiting for <unk> to be available on the pumps and so that was more of a one timer, which is why I would look to Q2 as being what I would say a more normalized run rate.
Speaker Change: For what shipments look like and so in terms of just opportunity outside the U S and you ask about comparison to the past few years, we still see a large and growing opportunity there not just from Brean.
Speaker Change: Our renewal customers, but the market, so vastly underpenetrated and with the products that we have today and the products that you're expecting to launch we expect to continue to grow and even in that new population, so expanding the market with MDI and more competitive conversion. So we're looking forward to growing that business outside the U S. Even further.
Speaker Change: CMS is hosting the bed CAC meeting I think on May 21.
Speaker Change: On health outcome studies.
Speaker Change: For devices in type one and type two.
Speaker Change: Insulin intensive patients.
Speaker Change: What are your expectations for the meeting and specifically what could this mean for the potential pump MTBE review. Thanks.
Speaker Change: Sara Lee answer that yes, so Larry.
Sara Lee: It's interesting right. So we see this as a very positive move the fact that they are and they are reviewing the end points and inviting the diabetes community to come in and speak about it from the manufacturer's perspective, and so you can guarantee that we're going to have represented there talking about the wealth of data that we've accumulated in what we think is the best way to look at those endpoints.
Sara Lee: And we think it's positive because that NCD is sitting out there and it is unexpected to be reviewed and so we hope that this is a positive step in that direction that we'll hear something on that in the near future, but for now there's nothing that says are directly tied but we're optimistic that this will be beneficial for us in the long term.
Speaker Change: Thank you.
Sara Lee: <unk>.
Speaker Change: Thank you one moment for our next question.
Sara Lee: And our next question comes from the line of Danielle <unk> from UBS. Your question. Please.
Danielle: Hey, good afternoon, everyone. Thanks, so much for taking the question congrats guys on this quarter, it's great to see.
Danielle:
Danielle: And John just a question on what Youre seeing from a market growth perspective, I mean, we all run surveys our survey is actually quite bullish.
Danielle: High teens, which I know sounds sounds Cui.
Danielle: Quite high relative to historical averages any comment there I mean are you seeing acceleration here given the number of <unk>.
Danielle: Integrated pumps out in the market how technology has evolved over the last five years any comments there would be helpful. And then of course, how sustainable that is or could it actually accelerate even further.
Speaker Change: Yes, great question, Danielle and it's really hard to put a fine point on the numbers, specifically trying to triangulate what everyone's reporting and based on that information, but what we think today is by the time, we exited 2023 that pump penetration had grown to nearly 40% in the type one population and that was up from mid to high <unk>.
Danielle: 30% range in 2022.
Danielle: So we have every reason to believe that with the new product portfolio that we're offering.
Danielle: That will continue to grow in the future and so we have great expectations for what this portfolio that we offer will bring to the market and how we'll be attracting new patients and so we expect continued growth in 2024 and the long term.
Speaker Change: Got it thanks, so much for that and how important to that growth is the the business model. Here. So you guys are it looks like making progress on the pharmacy channel, but how critical is that piece of it. Thanks so much.
Speaker Change: Yes, I do think it's important and there's a couple of factors I mean, one really is the product portfolio, particularly for us as we continue to offer choice in liability. It gives people we're going to be meeting the needs of more people, who haven't chosen pump therapy before so to flip that around from a second ago that 60% of pipeline, 60% of almost 2 million people haven't chosen pump therapy today.
Speaker Change: For us and grow the market overall.
Speaker Change: Thank you.
Speaker Change: Thanks Danielle.
Speaker Change: Thank you one moment for our next question.
Danielle: And our next question comes from the line of Matt Taylor from Jefferies. Your question. Please.
Matthew Charles Taylor: Hi, Thanks for taking the question I was hoping you could spend a minute on type two and maybe give us an update on what you are seeing any any type two trends I'm curious what you would say to an investor who might be worried about <unk> impacting the type two opportunity.
Matthew Charles Taylor: And then given you have now enrolled your trial could you talk about when the data could come out with that could show and the potential for type two to be a growth driver in the future.
Speaker Change: Sure Matt.
Speaker Change: The intensive type two and all of them were using MDI and none of them were achieving their diabetes objectives. They all have high agencies.
Speaker Change: And after they started using control IQ, they actually required less insulin and they dropped their agency substantially so we believe that.
Speaker Change: That control IQ systems that are out in the marketplace today.
Speaker Change: When it comes to the type two population are complementary to the use of the GOP ones.
Speaker Change: And I don't think we believe that it's going to have a substantial impact on the need for insulin, particularly in these in these groups, where they do use a lot of insulin.
Speaker Change: I would say that the study is as you say, it's nearly complete it's nearly enrolled.
Speaker Change: Conferences that we might have some data presented those but well.
Speaker Change: Just have to wait and see.
Speaker Change: There are some unpredictable and predictability about it but I.
Speaker Change: I think that we are we're definitely getting ready internally, we're preparing the organization for developing our commercial strategy and.
Speaker Change: And we're definitely getting ready to be very active in the type two space.
Speaker Change: Okay. Thanks, a lot John.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Joanne Wuensch from Citi. Your question. Please.
Speaker Change: Hey, Good afternoon. This is anthony on for Joanne Thanks for taking our questions.
Anthony: Guidance for EBITDA breakeven this year does that imply some sort of volume or user base going through <unk>.
Anthony: Given the lower Cogs profile or are you sort of able to hit that irregardless of what.
Anthony: How many patients you've got him over this.
Speaker Change: Yeah. Great question. So maybe is unique in this year and that are not unique necessarily but because we are at lower volumes and still scaling we're not going to see that great gross margin benefit that.
Speaker Change: That we expect to see in the years beyond until this year at the beginning it's a bit of a headwind in the back half of the year. It starts to become accretive but really 2025 is when we expect it to make a difference and so I would say that our goal of breakeven. This year is somewhat independent of mobi.
Speaker Change: Still achieve that breakeven target.
Speaker Change: Got it helpful. And then can you just talk about what youre seeing in the <unk>.
Speaker Change: Kind of an environment.
Speaker Change: As omnipod cybersource to ramp a little bit more here.
Speaker Change: Yes, I would say that the.
Speaker Change: Doug.
Speaker Change: Competitive environment <unk> is within our expectations I mean, we'd certainly.
Speaker Change: The two large players are on the market that have been on the market for a while I think that omnipod is getting.
Speaker Change: Getting into new markets.
Speaker Change: We also there is also another another competitor out there.
Speaker Change: That's getting into the markets as well, there's more noise or U S for sure I would say that Theres also a lot of variability because it's not homogeneous there's multiple different markets and the competitive environment is different than many of them. So I think that you know right now what we're focused on is really getting our technology into the <unk> markets, we're really focused.
Speaker Change: Bringing everything that we've got here in the U S to the U S markets as quickly as possible, we think that'll be a significant competitive response to what's going on there and so there's things happening. This year next that are exciting and we're also expanding the size of our footprint.
Speaker Change: Our portfolio approach, we think that it's important to provide people choice choice in how they were how they control.