Tandem Diabetes (TNDM) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Administration Officer and Investor Relations - Susan Morrison
• President and Chief Executive Officer - John F. Sheridan
• Executive Vice President and Chief Financial Officer - Leigh A. Vosseller

TAKEAWAYS

• Worldwide Sales -- $254.6 million, increasing 6% year over year driven by demand for Control-IQ and new product innovations.
• U.S. Sales -- $179.3 million, representing a 5% increase year over year reflecting pharmacy adoption partially offset by infusion set constraints.
• International Sales -- $75.3 million, up 7% year over year or 6% in constant currency.
• Worldwide Pump Shipments -- 33,000 units, an increase of more than 10% year over year and sequentially.
• U.S. Pump Shipments -- 22,000 units, growing 7% year over year and reaching a second quarter record.
• International Pump Shipments -- 11,000 units, increasing 19% year over year driven primarily by distributor markets.
• Gross Margin -- 57%, improving 5 percentage points year over year due to favorable pricing from the pharmacy channel and Mobi volume scaling.
• Adjusted EBITDA Margin -- 3% of sales, marking the fourth consecutive quarter of positive results.
• U.S. Installed Base -- 325,000 people, with approximately 6% using their pharmacy benefit to purchase insulin supplies.
• Pharmacy Sales Traction -- 10% of total U.S. sales in the first full quarter following the launch of the pay-as-you-go reimbursement model.
• Pharmacy Pump Shipments -- 10% of total U.S. shipments, with management noting that pump adoption slightly outpaced supply conversions.
• Formulary Coverage -- 45%, approaching the high end of the company's annual goal for the pharmacy channel.
• New Pump Starts -- approximately 70% from people transitioning from multiple daily injection, a mid single-digit increase year over year.
• 2026 Worldwide Sales Guidance -- $1.065 billion to $1.085 billion, reaffirmed for the full fiscal year.
• 2026 U.S. Sales Guidance -- $730 million to $745 million, consistent with previous management estimates.
• 2026 International Sales Guidance -- $335 million to $340 million, according to official regulatory filings.
• Stock-Based Compensation Expense -- $65 million estimated for the full year, a reduction from the previous forecast of $80 million.
• Cash and Investments -- $456 million as of June 30, 2026, compared to $570 million at the end of the first quarter.
• International Direct Revenue -- 13% of international sales, more than doubling levels from the prior year.
• Mobi New Start Adoption -- more than 50% of shipments to new customers, reflecting interest in the company's smallest pump platform.

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RISKS

• Vosseller stated, "Sales reflect approximately $3 million of headwinds related to distributor inventory buybacks in markets where we have already transitioned to direct operations," noting the financial impact of the international model transition.
• Sheridan warned that the company continues to manage shortages from its key infusion set supplier, noting that the second quarter was expected to be the period of greatest impact.
• Vosseller noted that international sales were impacted by timing issues as infusion sets were received late in the quarter, which limited distributor order fulfillment before the period ended.

SUMMARY

Management at Tandem Diabetes Care, Inc. (NASDAQ:TNDM) reported progress on three core strategic priorities: transitioning to a pay-as-you-go pharmacy reimbursement model, modernizing the global commercial organization through direct international launches, and advancing its product pipeline. The company reported record second quarter sales and worldwide pump shipments, supported by the scaling of the Tandem Mobi system and increased formulary coverage. Management confirmed that the U.S. business is shifting toward pharmacy-based supply sales, which creates a near-term revenue headwind for hardware but results in higher long-term recurring revenue pricing. Internationally, the company is moving away from distributor-led models in key European markets such as the United Kingdom and Switzerland to capture higher margins and improve customer service.

• Sheridan confirmed the team reached an R&D milestone in the second quarter with the 510(k) submission for Mobi tubeless, stating the product is "designed to transform the existing Mobi pump into a tubeless AID system."
• The company advanced its automated insulin delivery research, receiving FDA approval for an Investigational Device Exemption for its AdaNet algorithm to begin a pivotal study.
• Sheridan described AdaNet as being developed to help users "meet the clinical time in range guidelines whether they are new to pump therapy or long time users" without requiring meal announcements.
• The company made an additional strategic investment in Secur, a private firm developing a wearable patch for simple mealtime insulin delivery.
• Management reported that type 2 diabetes attrition rates have remained stable over the past five years and are only modestly higher than type 1 rates.
• Tandem expanded its CGM compatibility, launching t:slim X2 integration with the Abbott FreeStyle Libre 3 Plus in seven countries outside the United States.
• The company plans to launch AutoSoft Plus, a new infusion set designed for one-handed insertion, in the United States later this year to mitigate supplier-related shortages.

INDUSTRY GLOSSARY

• 510(k): A premarket submission made to the FDA to demonstrate that a medical device is safe and effective by being substantially equivalent to a legally marketed device.
• AID (Automated Insulin Delivery): Systems that integrate an insulin pump, a continuous glucose monitor, and an algorithm to automate insulin delivery.
• CE Mark: A certification mark that indicates conformity with health, safety, and environmental protection standards for products sold within the European Economic Area.
• CGM (Continuous Glucose Monitor): A device that monitors blood glucose levels in real-time throughout the day and night.
• MDI (Multiple Daily Injection): A diabetes management method involving several manual insulin injections per day rather than using an automated pump.
• PayGo (Pay-As-You-Go): A reimbursement model where customers pay for insulin pump technology and supplies as they are used, typically through the pharmacy channel, rather than through an upfront durable medical equipment purchase.
• Tandem Mobi: The company's smallest insulin pump, which is fully controlled through a mobile application.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to the Tandem Diabetes Care second Quarter 26 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Susan Morrison, Chief Administration Officer and Investor Relations. Please go ahead.

Susan Morrison: Hello, and welcome to Tandem's 2026 Second Quarter Earnings Call. 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 those anticipated or projected in our forward looking statements. Which are described in our press release issued earlier today and under the Risk Factors portion of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Today's discussion will also include references to both GAAP and non GAAP financial measures. Please refer to our earnings release issued earlier today.

And available on the Investor Center portion of our website for a reconciliation of non GAAP measures to their most directly comparable GAAP financial measure and other information regarding our use of non GAAP financial measures. John F. Sheridan, Tandem's president and CEO, and Leigh A. Vosseller, executive vice president and chief financial officer will be providing prepared remarks on today's call. After which, the operator will open the call for questions. Thank you for limiting yourself to 1 question before rejoining the queue. I will now turn the call over to John.

John F. Sheridan: Thanks, Susan. We appreciate everyone joining the call today. The second quarter marked an important step forward for Tandem. We are executing against our strategic priorities while demonstrating operational momentum improving our financial performance, and providing broader access to our technology. This progress was evident in our results, with worldwide pump shipments growing more than 10% year over year and sequentially. In the U.S., the highlight of our performance was improvements in new pump start trends. Led by a standout number of people transitioning from multiple daily injection. Internationally, we saw an acceleration of adoption in the countries where we launched direct efforts earlier this year. Additional Q2 highlights included significant margin improvement.

Including the second highest gross margin of any quarter in our company's history. We also advanced the global launch of new technologies. While preparing to expand our portfolio with the FDA submission for tandem Mobi's tubeless feature. We will discuss each of these accomplishments in greater detail on the call today. I will begin my remarks with an update on the 3 strategic priorities we laid out at the beginning of the year. Which included reshaping our business model, modernizing our commercial organization, and delivering new technology. In March, we launched pay as you go reimbursement in the pharmacy channel. This transition was designed to create clear benefits for customers, prescribers, and payers with better economics to tandem.

During the second quarter, our focus was on early implementation. This included updating the end to end processes for how our technology is prescribed, how we support customers, and how our orders are processed. We are encouraged with the momentum behind this transition and beginning to see efficiencies that are positively contributing to our results. We now have approximately 45% formulary coverage. Which is already approaching the high end of our range for the goals this year. Access is a critical first step to driving PayGo adoption, and teams are now focused on driving plan utilization. In our first full quarter offering PayGo, US sales through the pharmacy channel increased to 10%.

This early traction reinforces our confidence in the pharmacy strategy and the broad reaching benefits it can deliver. The second key initiative I will touch on is modernizing our commercial organization to improve productivity and support profitable growth. The work has been underway for the past year, and we are pleased with the progress. Key accomplishments include the deployment of a new CRM system, to improve Salesforce efficiency and effectiveness, provide deeper insights into our customer base, and support our global channel strategy. This includes enabling our US pharmacy transition and supporting direct commercial launches internationally. Our international direct launches began earlier this year in The UK, Switzerland, and Austria, with plans for France to follow in the fourth quarter.

This strategy better positions Tandem to serve our customers and health care providers in these while strengthening our financial profile. The final key initiative I will discuss is our delivery of new technology. Starting with the expansion of our global portfolio. We continue to reinforce our competitive advantage with Control IQ plus which now has the broadest indication of any AID system in The US, including pregnancy. Similarly, we strengthened our advantage internationally. As we receive CE Mark in Q2 for pregnancy as well as adults living with type 2. Great excitement is also building internationally, as we are in the early stages of introducing tandem Mobi outside The United States.

We plan to bring our tiny pump with big outcomes to more than 10 countries by year end, including some of our largest markets. In addition, our team has been working to broaden CGM compatibility. For Abbott's FreeStyle Libre 3 plus, t slim is now compatible in 7 countries outside The United States, We plan to expand to additional markets throughout the year. Dexcom's G7 15-day sensor is now compatible with Mobi and t slim in The US, international markets are soon to follow. These launches are consistent with our efforts to ensure the broadest possible coverage across devices and markets.

Looking ahead, the team continues to drive long term innovation across our pumps, infusion technology, software ecosystem, and AID algorithms. Starting with pumps, reached an important R&D milestone in Q2 with a 510(k) submission for Mobi tubeless This new infusion side option is designed to transform the existing Mobi pump into a tubeless AID system. Giving users the unique flexibility to choose between tube and tubeless wear on a single hardware platform by simply changing the supplies they use. Compatible with the existing MobiPump, subject to FDA clearance, This will be Tandem's first tubeless pump offering and the world's first with extended wear technology. An important differentiator that enhances our position in this dynamic market segment.

Pre commercial preparations are actively underway. Our goal remains to begin a scaled launch this year. After which time we will begin training our field and HCP community on the novel tubeless Mobi feature we will also begin updating our payer contracts and completing operational activities in support of the launch. Infusion technology is another key area of focus as we work to expand tube and tubeless options, improve comfort, extend wear time, and simplify the user experience. To support this, we are launching AutoSoft Plus, a new set designed to enable quick set changes with reliable 1-handed insertion. We introduced AutoSoft Plus in Canada, in late July and plan to expand to additional geographies including The U. S.

Later this year. This timing is important as we continue to manage shortages from our key Infusion Set supplier. We believe Q2 was the period of greatest impact and our supplier expects availability will improve through the second half of the year. The launch of AutoSoft Plus is expected to reduce the demand for the SKUs currently under allocation. Looking to the first half of 27, we plan to provide further choice in infusion sets with the launch of SteadySet. Our proprietary technology that is FDA cleared for wear up to 7 days which is now in manufacturing scale up. The last technology advancement I will discuss is our work in automated insulin delivery.

Since Tandem was founded, we have maintained our vision of creating an AID system worthy of the term artificial pancreas. Today, we are closer to this vision than ever and excited to begin sharing more details. Under our long standing research collaboration with the University of Virginia, we are advancing their next generation AdaNet algorithm into a compelling fully closed loop experience for everyone. AdaNet, which stands for automated insulin delivery as an adaptive network has been under active development and clinical testing for the past several years.

We are developing a system designed to help both type 1 and type 2 users meet the clinical time in range guidelines whether they are new to pump therapy or long time users, Our goal is to achieve this without meal announcements or other user inputs. But because diabetes can vary day to day, we are also designing the system to incorporate additional user context and respond in more personalized way. This is an ambitious goal, but advancing close-in technology and solving the most complex real world use cases. Over the past 2 years, our development and user experience teams have been working toward that objective.

Culminating in FDA approval of an IDE in Q2 and positioning us to begin a pivotal study later this year. Overall, the second quarter progress reflects the strength of our execution across the priorities that we set for the year. We remain encouraged by momentum that we are building remain focused on translating these initiatives into broader customer impact. While improving our financial performance. With that, I will turn the call over to Lee to provide more detail on financial results.

Leigh A. Vosseller: Thanks, John. Our second quarter results reflect strong execution and accelerating progress across our strategic initiatives, which are beginning to deliver sustainable operational and financial benefits. It was a record second quarter performance worldwide for sales, pump shipments and gross margin. Beginning with sales, we shipped approximately 33 thousand pumps worldwide. This was driven by the continued demand for Control IQ, new product innovations, and improved channel access. Worldwide sales were $255 million, increasing 6% year over year or 5% in constant currency.

This was the tenth consecutive quarter we delivered record results for the respective sales quarter, which is a trend we plan to continue building on even during our business model transition in the U.S., we shipped Q2 record of 22 thousand pumps growing 7% year over year. We have seen improvement in the new start trajectory with Q2 new starts nearly flat to last year, But stepping up impressively by more than 20% from Q1. Notably, new customers coming from MDI grew mid single digits year over year and now represent approximately 70% of new pump starts.

This improvement was driven in part by increasing enthusiasm for Tandem Mobi which now represents more than half of our shipments to new customers as well as the availability of a more affordable option through pharmacy. Renewals at more than half of our pump shipments continue to be a robust source of business at double digit growth. This retention is a direct reflection of the value we place on delivering high levels of customer service, driving strong customer satisfaction. U. S. Sales totaled $179 million, increasing 5% year over year. This reflects measurable improvement in pharmacy adoption, partially offset by the expected impact of infusion set constraints from our key supplier.

As John discussed, we continued the implementation and rollout of our PAYGO offering through the pharmacy channel that began in March. During the second quarter, our teams focused on educating patients and physicians about the offering as well as optimizing the new processes and workflows for scale. In this first full quarter under the PAYGO structure, pharmacy pump shipments were approximately 10% of total shipments. As a reminder, pump shipments through the pharmacy channel do not include upfront reimbursement which creates a near term headwind to revenue when compared to a traditional DME sale.

This initial pump headwind is more than offset over time by higher pricing for recurring supplies for both new PayGo customers and existing customers who transition from use of their DME benefits. In the second quarter, the initial headwind from pharmacy pumps was approximately $8 million, yet we still saw more than half of our sales growth driven by net favorable pricing. This benefit came from the 6% of our US installed base of approximately 325 thousand people who use their pharmacy benefit to purchase supplies. As a result of this meaningful early adoption of both pumps and supplies through PayGo, sales through the pharmacy increased to 10% of total US sales in Q2.

In our first full quarter of offering PayGo, pump adoption progressed slightly faster than supply conversions of existing customers, and is expected to continue to do so in the third quarter. Directionally, we anticipate that each of these measures will continue to step up across the quarters as momentum builds, tracking in line to achieve the average annual modeling assumptions we illustrated at the beginning of the year. I will also note that we are seeing a higher average monthly ASP for pharmacy supplies compared to the $350 per month originally provided for modeling purposes.

We are not updating our baseline assumption at this time as we would like to gain more experience, but needless to say, the early data is encouraging. Turning to our international performance, we shipped approximately 11 thousand pumps in the second quarter, which is an increase of 19% year over year. While shipment growth in the quarter was primarily driven by our distributor markets, we are beginning to see encouraging traction in our direct European markets from our direct sales and marketing efforts, which reinforces our expectations for sustainable top line growth and margin expansion over time. International sales totaled $75 million, increasing 7% year over year, or 6% in constant currency.

Direct channel sales represented approximately 13% of revenue, more than double prior year levels. As we continue executing our transition strategy. Sales reflect approximately $3 million of headwinds related to distributor inventory buybacks in markets where we have already transitioned to direct operations, as well as destocking ahead of future transitions. Sales for the quarter were also impacted by our key infusion set supplier's constraints, which, unlike The U. S, were greater than anticipated this quarter. The impact was largely due to timing as infusion sets were received late in the quarter, limiting distributor order fulfillment before quarter end. Turning to margins. Gross margin was 57%, improving 5 percentage points year over year and 2 points sequentially.

It reflects continued execution against our key margin drivers, including price appreciation from our global channel strategies and product cost improvements as Mobi volumes continue to scale. Operating expenses were $159 million, remaining relatively flat year over year while we continue to invest in strategic growth initiatives in our global commercial infrastructure and product portfolio. Adjusted EBITDA margin increased to 3% of sales, demonstrating a positive result for the fourth quarter in a row. This continued improvement reflects the benefits of scale and sustained gross margin expansion, while maintaining investment in future growth opportunities. Stock based compensation expense decreased meaningfully in the quarter to $16 million or 6% of sales, down from 11% of sales in the prior year.

This improvement reflects changes made in recent years to our equity granting to align with benchmark for companies of our size. We anticipate the stock based comp for the year will now be approximately $65 million, lower than our original expectation of $80 million. The reduction in this noncash expense meaningfully contributed to the 8-point improvement in operating margin at negative 5% of sales. We ended the quarter with a healthy balance sheet, including $456 million in cash and investments compared to $570 million at the end of Q1.

The change reflects meaningful investments in a new CRM system to support global initiatives, the second annual payment under the Roche settlement agreement, and an additional strategic investment in Secure, a private company we have invested in since 2021. Secur provides simple mealtime insulin delivery through a wearable patch offering a low tech option for people with insulin dependent diabetes, who are not seeking an AID system. It complements our automation focused strategy for insulin intensive diabetes, while providing insights into a new type 2 segment to inform our long term strategy. Turning to our 2026 expectations, we remain confident in our ability deliver on our goals for the year and are reaffirming our sales and margin guidance.

Worldwide sales are expected to be in the range of $1.065 billion to $1.085 billion. This includes US sales in the range of $730 million to $745 million and international sales in the range of $305 million to $340 million. We expect gross margins in the range of 56% to 57% and adjusted EBITDA margin of 5% to 6% of annual sales. For the third quarter, worldwide sales are expected to be approximately $265 million. This includes $180 million in The U. S, reflecting increasing pharmacy adoption. Internationally, we expect sales of $85 million taking into consideration seasonality typically experienced in the summer months and modest improvement in the availability of infusion sets from our supplier.

Gross margin is expected to be approximately 56% and adjusted EBITDA margin approximately 2% of sales, based on pharmacy pricing dynamics, as well as a planned increase in operating expenses in support of commercial initiatives. We continue to expect to achieve our highest margins for the year in the fourth quarter driven by an increasing percent of our U. S. Installed base ordering pharmacy supplies, seasonality in US DME pump sales, and a larger direct presence in Europe. In closing, the strength of our second quarter performance demonstrates continued advancement against our strategic and financial objectives. We remain focused on driving sustainable growth, expanding profitability and delivering long term value for our shareholders.

With that, I will turn the call back to John.

John F. Sheridan: Thanks, Lee. Before we close, I want to recognize the entire Tandem team for the focus and the care you continue to bring to work every day. Your efforts are helping us advance our priorities, support our customers and health care providers, and sustain progress across the business. Thank you for everything you do on behalf of Tandem and the diabetes community we serve. In conclusion, our second quarter performance reflects solid execution against the priorities we set for the year and reinforces our confidence in Tandem's strategic direction. Looking ahead, we remain focused on building on this momentum, expanding customer impact through affordable and innovative technology, supporting profitable growth, and building our leadership position in diabetes technology.

Thank you again for joining today. We are excited about the opportunities that ahead and look forward to sharing updates on the continued execution in the upcoming quarters. Thank you.

Operator: Our first question comes from the line of Mathew Blackman from TD Cowen. Your question please.

Matthew Blackman: Good afternoon, everybody. Can you hear me okay?

John F. Sheridan: Yep. How are you doing, Matthew?

Matthew Blackman: Doing well. Thanks, John. Maybe John or Lee, could you just maybe talk about some of the areas perhaps of friction in the pharmacy transition process that you are finding and know, maybe whether there have been any surprises, good or bad, in that discovery process know, relative to the full year guide you gave, just the conviction you have today still in that full year guide for 20% of pump shift through the pharmacy, 10% for the installed base, 15% of revenue. Just, you know, anything that helps give us some confidence as well that the ramp is, is going as planned? Thank you.

John F. Sheridan: Suraj. Well, I would say that we are actually very pleased with the early PAYGO experience. It reinforces our conviction that this is an important and meaningful opportunity for the business. I would say that, you know, the things that we experienced this quarter would be the normal learning curve that comes along with implementing a new process. As we have said, the process actually you know, it is it is it is a end to end change in how we do business, how the ACPs prescribe, how we service the customers, and how we fulfill orders. So it is a it is a meaningful change to the business. But I would say, there was nothing that was, surprising.

We feel like we are on track. We are still continuing to work on developing efficiencies. I think that, you know, when you look at the performance, 10% of the sales went through pharmacy. that is when you think about that, it is really the first quarter of, of meaningful, you know, presence in the pharmacy channel. We are very happy with it. And, it just continues to reinforce the fact that this is a significant opportunity for us, and we are gonna continue to plug away as we have. Thank you, John. Thank you.

Operator: And our next question comes from the line of Richard Samuel Newitter from Truist Securities. Your question please.

Felipe: Hi. This is Filipe on for Rich. You know, your largest competitor called out retention issues in the type 2 community. So I just wondering if you could maybe comment on your experience with type 2 patients in the quarter and if you are seeing any of those trends. Thanks for taking the question.

John F. Sheridan: Yeah. I am you know, I think that, again, I just like pharmacy. Type 2 expansion is another huge opportunity for us, and that is gonna really drive growth going forward. You know, it is an underpenetrated market both in The US and internationally. Certainly requires market development, and there is still a lot of learning to do. Know, we are not gonna talk specifically about the numbers today. it is early, and there is still a lot of sources of growth that is in process. But I will say relative to attrition, that our type 2 attrition, it is really modestly higher than our type 1 rate. And it is been stable over the past 5 years.

You know, we have employed a strategy where we intentionally are selective of and focus on patients who have the highest likelihood of success. And I think that is pretty much what is driving you know, that success in the attrition for us. You know? And as far as the indicators that I think that we want to keep track of, you know, there is the c the c peptide decision with CMS. You know, we had we went and actually spoke to CMS in the last few weeks with a consortium of others trying to eliminate the C peptide decision.

And I think we made a on what the impact is on the Medicare population of having to do this. And I think we left the meeting pretty optimistic and it is this month. it is August of when we expect to hear results. We also expect tailwinds from FreeStyle Libre 3, from Mobi Tubeless Pharmacy Access, And, you know, we continue to invest in, I would say, just digital marketing and creating awareness with PCPs and HCPs.

So, you know, I think we are again, we are very excited about this. it is you know, it is an important part of our strategy going forward, and we anticipate seeing growth in type 2 MDI during the year, and we will continue to report on it as things go on. Thank you.

Operator: And our next question comes from the line of Larry Biegelsen from Wells Fargo. Your question please.

Larry Biegelsen: Good afternoon. Thanks for taking the question. Lee, The U. S. Pump shipments were a little soft in Q2 year over year basis, sequential basis. From what we typically see. And new starts were flat, and I think you know, you had expected them to be up year over year in Q2, I think. So is there anything to call out in Q2? And it does look like you need, call it, 12% to 13% year over year pump growth in the second half. To reach the midpoint of The U. S. Pump guidance. So what are the drivers of that acceleration in pump shipments in the second half? Thanks.

Leigh A. Vosseller: Suraj. Thanks for the question, Larry. So we did see we saw strong growth. And remember, we are at the very beginning of a lot of our initiatives that we expect to gain momentum across the year. So to your question about what really going to drive that back half strength, we have a number of new products under launch right now. And so an example would be FreeStyle Libre 3, which we launched late last year, Mobi Android also late last year, early into this year, and we are already seeing results from that. We are seeing that our Mobi starts are growing to more than half of our new pump starts.

We have pharmacy, which as John spoke to earlier, it is the first full quarter of that, and it is really removing that affordability barrier that people have had. To shift to pump therapy. And so as we drive that momentum forward, those are some of the areas that we expect to really put us give us that back half strength. 1 thing I will highlight on the new starts this quarter, while we were just short a few hundred pumps from growth, Actually, what we saw were that MDI conversions, which arguably is the most important metric, grew mid single digits year over year. And it is been an improving trajectory over the last few quarters.

And so that is the signal that we need to support that we the confidence that we have the year in terms of reaching that back half strength and continue to see new start growth this year. Thank you.

Operator: And our next question comes from the line of Matthew O'Brien from Piper Sandler. Your question please.

Anna: John Lee. This is Anna Filipe on for Matthew. Thanks for taking our question. I guess, want to ask on gross margin. Was really strong in the quarter. Much better than we had modeled. And just curious to understand the thought process behind the reiterated gross margin guide, given the outperformance there and the strong adoption you are seeing on the pharmacy side, I am curious why it is supposed to sort of step down sequentially in the third quarter. So just any thoughts there would be helpful. Thank you.

Leigh A. Vosseller: Suraj. Yes. So we are very excited to share this gross margin progress that we are making. it is something that is been a I would say, a point of contention for many years. And to have this significant of a step up is a really good demonstration of where this can go in the future. And that is on still a relatively low percentage of sales coming from pharmacy. And so 2 things really drove the strength this quarter. It was the pricing benefit from the pharmacy channel as we continue to push that adoption percentage. Also, the fact that the Mobi volumes are growing and scaling, and so that is contributing from a cost perspective.

As we look ahead, we guided to a point down in Q3 but still achieving that 60% gross margin in the fourth quarter. And that just comes from the variability as we push this pharmacy adoption. And so the 2 levers are really what percentage of pumps go through pharmacy at that $0 price which actually creates a headwind on sales, which pressures the gross margin. And then you have that added benefit that comes from the people ordering supplies in the pharmacy channel. And so as we look forward to the pacing, we anticipate that the pump adoption in PAYGO might outpace in the next quarter the pharmacy supplies adoption.

And so that just plays a little bit with the margin optics. But in the long term, this is really to drive great strength overall as we continue to accelerate this initiative. Thank you.

Operator: And our next question comes from the line of Suraj Kalia from Oppenheimer. Your question please.

Jacob: Hi, great. Thanks. This is Jacob on for Suraj. Thanks for taking the questions. I guess just looking at Mobi tubeless and the ramp there, are there any gross margin dynamics we should keep in mind during the phase launch? Does it carry different consumable mix or cost structure that could create any temporary changes in the margin before you reach scale?

Leigh A. Vosseller: Yes. Thanks for the question, Jake. it is a really important point. With any new product that you launch, you are not going to reap the full benefits until you get to a level of scale. And so much like when we first launched Mobi a few years ago, we saw a little bit of a headwind in gross margin. But not incredibly meaningful. And just more so keeps it flat and not necessarily continuing to step up. But there is really nothing else to speak to. We are super excited for that technology to come to market.

And so the other area I would speak to as we think about a launch of a product of that magnitude would be you might see a step up in sales and marketing as we make that we are getting the awareness out there as quickly as possible.

Operator: And our next question comes from the line of Joanne Karen Wuensch from Citi. Your question please.

Joanne Karen Wuensch: Good evening, and thank you for taking the question. I would just wanna double click on Mobi tubeless, and I wanna confirm or ask if it has been filed with the FDA. And what is your current updated timing on that launch? Thank you.

John F. Sheridan: Hi, Joanne. I have to say we have filed it and we just filed it in the second quarter. Right now it is under review. We are very excited about this. it is we have made this clear. it is it is the first extended work packs that will be on the market it is, you know, it is it is it is it is gonna be a great product, and we are very excited to have it out there. When it comes to what is what is next, I mean, we are obviously gonna be waiting clearance but we are we are planning on having clearance and actually beginning the scaling launch in the second half of this year.

You know, what we have to do still is once we get a you know, the clearance or some things we will probably have to do to make changes in the documentation for the FDA. there is training we have gotta conduct with our own people and with HCPs. there is contracts we have got to know, go out and start to modify. Then we initiate this early access program where we put patients on the product for you know, a few weeks to a month just to make sure that it is performing the way we expect it to.

So we are all we are planning for all of this, you know, including, you know, kind of a an aggressive marketing program once, it does get approved and well, again, really looking forward to getting this into the market this year. But it will be a scale launch for the rest of this year. Thank you.

Operator: And our next question comes from the line of Mike Kratky from Leerink Partners. Your question please.

Mike Kratky: Hi, everyone. Thanks for taking our questions. Maybe just to follow-up on Matthew's question earlier on the confidence in maintaining that 20% of U. S. Shipments through the pharmacy this year. I mean, would seemingly require a fairly major step up for 3Q and 4Q. So just curious in terms of the quarterly cadence between 3Q and 4Q that is built into your expectations there. And is that 4Q exit rate a reasonable assumption for a jump off point for 2027?

Leigh A. Vosseller: Yes. Thanks for the question, Mike. So the way I will start first is thinking about what the opportunity is. And today, we already have 45% formulary coverage. And so we are at a point where we are nearing the high end of our range of goals for this year in terms of coverage and access. And so the opportunity exists. As John talked through how we launched in the second quarter, in the early months, there are just things you learn, and you have to scale, and you have to adjust, and you to pivot along the way, and the momentum is strong. And so we feel really good that it is going to keep growing.

In fact, in the second quarter, we shipped more pumps through PayGo than we did all of last year in our old pharmacy model. And so it is moving in a really good direction. And when you take away that cost per patient, it is easier to bring new patients onto the technology. We just have to get through some of these early learnings and really start driving that awareness with each and the patients that this opportunity exists. And so when we thought about second quarter, we built in a pretty hefty step up in terms of percentage that we would expect to go through pharmacy. And a really high exit rate as well.

So we have not given any specific details on what those numbers are, but it will continue to step up meaningfully each quarter. And we feel very convicted in the ability to achieve that. Understood. Thanks.

Operator: Thank you. And our next question comes from the line of Karen Ryan from Deutsche Bank. Your question please.

Karen Ryan: Hi, there. Thanks for taking my question. I just wanted to check-in on how you are tracking on converting users over to pharmacy at renewal. If you wanna maybe talk about some of the patterns and trends you are seeing there and how that can to some of the other pharmacy growth opportunities and new starts or in warranty conversions, which I think are kind of the most attractive for you since they do not come with the pump headwind. Thanks.

Leigh A. Vosseller: Suraj. So have not really spoken to any particular details about the sources. Where pharmacy is driving the most opportunity. But as you point out, I will go through a couple of just pieces of information. For new starts, it is very attractive. Many of those folks who are coming from MDI never moved to pump therapy because of the cost. So it is something that it makes it easier to have those conversations about what the products offer because they have to worry about the cost burden in mind as much. For renewal customers, where it can help when they are out of warranty, would really be that they do not have to wait as long.

Sometimes they go through that same cycle where they do not wanna make that next purchase. Their pump's still working fine, but this helps them be able to move forward more quickly with a renewal and or a switch If they were on PSIM and they wanna move to Mobi, it gives them that opportunity. We do not particularly focus on shifting our own in warranty customers over, but it make it easier for patients who wanna convert from other technologies that may be in a contract to shift to our product in the pharmacy channel.

So there are many ways where we can drive this penetration with pharmacy that will contribute to us achieving that 20% target that we have set out for the year. Thank you.

Operator: And our next question comes from the line of Jason Bedford from Raymond James. Your question please.

Elena: Hi, this is Elaine on for Jayson. Thanks for taking my question. I was wondering, can you share some more color on how your conversations with payers have evolved since introducing PayGo? You mentioned seeing a higher price than your initial expectation, which sounds interesting. Could you maybe share a little about what might be driving this, and do you see an opportunity for a higher price in the future? Thank you.

Leigh A. Vosseller: Suraj. So from the payer perspective, I would say we have already have contracts with the top 3 PBMs. So we have really great, coverage there. And, basically, anyone else that is up, we pretty much are talking to them. And we are at different points or stages in our negotiation. And so it is going very well. The new model is making a big difference in terms of getting that formulary coverage versus the model that we had last year. So we are going to continue to pursue that.

And as we look ahead, it will become more about protecting and defending what we have and continuing to drive preferred access in cases where we do not have that today. The pricing, so we had set out, I am gonna say, a modeling for people to start at $350 per month per patient. The contracts that we have varying levels of rebate associated with them. And also an unknown for us is what level of co pay assistance that patients might actually utilize.

And so, we factored in conservatively that we could do at least $350 a month We did indeed, do better than that in the second quarter, but I would dare say we do not have a sustainable trend necessarily to say this is the new number that it will be. So we wanna monitor this over the next couple of quarters and see where it starts to shake out on a on a regular basis. And then we can talk more about what that looks like in the future. I think it is fair to say that we have our eyes set on a higher number down the road.

As we see in the market that competitively others speak to higher price points. And so we look forward to driving towards that number ourselves.

Operator: And our next question comes from the line of Anthony Charles Petrone from Mizuho. Your question please.

Analyst: Hey. Hello. Good night. This is on for Anthony. it is congrats on the print of You know, it is pretty good across most sectors, but it looked like international supplies was maybe a little weaker than expected and do not know if you can provide any you know, color or what is what happened there in the quarter and maybe if there is anything we should be thinking about for the rest of the year? And maybe a quick follow-up I think, you know, we all look forward to Mobi tubeless and just I feel like we have not heard much about Sigi lately, and I do not know if you can get an update around that. Thanks.

Leigh A. Vosseller: I will start with the supplies question internationally. So we have been, I would say, on our worldwide business managing through an supply chain constraint with infusion sets that come from a third party. it is something that began late last year but became more impactful here in the first half of 26. We believe the greatest impact was in the second quarter. And for us, that was the primary reason that we saw softness in supply sales in the second quarter. We did receive the level of inventory allocation that we expected to get in the second quarter. So we can say that we believe we are on track with our supplier with what we should get this year.

It just came so late in the quarter we were not able to turn it around and get it into distributors' hands before we close the quarter. So it is really more of a timing element there. And again, we do think second quarter has the greatest impact. We will still see some impact in the next couple of quarters, but it will lessen across the year. And at this point, we like we are managing well through the situation, and we still feel confident in achieving our guidance for the year.

John F. Sheridan: And then relative to SIGI, I would say that we have taken the technology resources from Switzerland and brought them here to San Diego. Now we are working on I would say, the next generation Mobi. The next generation Mobi will incorporate the Sigi technology and also some of the Mobi technology. And that is that is going to come to market in a while. I would say that right now, our focus really is to get Mobi tubeless to the market. We think that Mobi tubeless is gonna have a meaningful life. You on the order of a 2- to 3-years.

And in that time frame, we will continue to work on the next generation Mobi which, as I said, will include the technology that we purchased from Sigi, and we think that will be a great next product, but it is not gonna be in the market for a little while. Okay. Thanks, guys.

Operator: Thank you. And our next question comes from the line of Travis Lee Steed from Bank of America. Your question please.

Grace: Hi. This is This is Stephanie on for Travis. Congrats on filing Mobi and being on track for the launch. Just wanted to ask how we should think about the launch ramping and uptake into 2027 with other competitors coming to market potentially end of this year and early next year with their patch pumps. And maybe any preliminary thoughts on market growth in The US in 2027 and how these patches can accelerate growth.

John F. Sheridan: Right. I think when you look at the market today, there is a tube space and a tubeless space. And if you look at the market growth rate in the tube space, it is single digits, maybe mid single digits. If you look at the growth rate of the market in the tubeless space, it is over 20%. And so, you know, we think getting into that market with a tube product is gonna give us access to a significantly higher interest level and it is going to drive meaningful growth. The point where I think this will be an inflection point in our revenue curve when it is on the market and fully released.

I think as I said, there is still uncertainty from the FDA and, you know, we have gotta get through our launch processes. But I would say that we do expect to have the product on the market in the second half of this year. I would say that 27 is really gonna be a full year where we have the product in the market. I do believe it will compete effectively against all of the existing and devices that are that are near release as well.

And I can say that we have done that through a number of marketing panels where we have just you know, we basically just spent a lot of time understanding what people like about what is on the market as well as, as well as tubeless Mobi. And then at the ADA, we did a number of we had a number of seminars or sessions with physicians where we actually sat that down in the room, and we showed them product. We showed them how we needed this to transition from a tube to a tubeless device. And I have to say that the response was just overwhelmingly positive.

So, you know, we think Mobi tubeless is gonna be a very important device for us. It will start this year, but I think 2027 will be the year where we will really see the positive impact on not only on revenue, but on margin. Thank you.

Operator: And our next question comes from the line of Jonathan Block from Stifel. Your question please.

Jon Block: Great, guys. Thanks. Good afternoon. I am just curious Lee, roughly how much higher has pharmacy been running above that initial $350 per month assumption? And maybe what that does or does not say about the number of people transitioning to pharmacy for supplies? In other words, it is running decently above, I think that would imply that the number of conversions is running a little bit behind plan, if I got that correct, and any thoughts why that would be the case?

Leigh A. Vosseller: Yeah. Great question. I am not gonna speak to the difference that we saw in price versus the modeling assumption we had put out specifically Other than your point is accurate that some of that pricing benefit was part of the reason for the overachievement in the quarter. What we did see in this early adoption phase, and this is really as there is a lot of things to work on as the volumes are coming through pharmacy. There was a little bit more of a focus on getting the PAYGO pumps out the door. So thinking about bringing those new patients into the family who really want a pump.

And for patients who are already ordering supplies from a through DME who are happy customers, no rush to push them through. A lot of it is a balancing act because all of this takes physicians' time to write new prescriptions. And so as we get the workflows going and the efficiency efficiencies driving, we will continue to push on those conversions of existing customers So the pump adoption slightly outpaced I would call, the patient conversion or adoption that you have there on the supply side.

And we expect that may continue into the third quarter but that it will really start to change as we get into the fourth quarter and going into next year when we have that co pay assistance to help people, especially when they usually meet those deductible resets in the first quarter. Perfect. Thank you.

Operator: Thank you. Our next question comes from the line of Dane Reinhart from RW Baird. Your question please.

Dane Reinhart: Hey, John and Leigh. Thanks for the time and questions here. Just 1 quick 1. I mean, it is been a few quarters now since you have kind of had that type 2 label expansion. I think you are a few quarters in now as well to really pushing with your sales force and having them go on kind of the full offense there. So just any indications of maybe what percentage of your new starts are type 2 right now and just what you are seeing in that underlying market? From an overall growth perspective? Thanks.

John F. Sheridan: Yeah. Thanks, Dane. You know, I think we have chosen to stay away from giving specific numbers about how we are doing. And I think what we really want investors to focus on is the broader indications for adoption. And I will say that, you know, you are right. We have really this is this year is you know, last year was kind of piloting to understand how this year, you know, we really worked with Salesforce you know, in terms of they have objectives in terms of you know, of type 2 sales, etcetera.

And as I said, when you look at these indicators, they are they are all moving in a positive direction, and we think that is gonna drive growth over time. And I mentioned the C peptide decision You know, we expect that is going to be made this month. We expect it to be positive. Do not really know how that implementation will occur. I think any steps in a positive direction will be good for people with type with type 2. Then we also have a number of like, I just structural things.

Like, we have FreeStyle Libre 3, which we know is, you know, something that is that is going to drive. it is a large market. it is underpenetrated. it is gonna drive type 2 interest. Mobi tubeless, of course, will, and so will the pharmacy access. So I think there is a lot of things that we have got lined up that are all going to have a favorable effect, but you know, I think we have chosen not to speak directly about the numbers at this point in time. So thank you. Thank you.

Operator: This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation in today's conference. You may now disconnect. Good day.

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