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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
Form 10-Q
 _____________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33462
___________________________________________________________
INSULET CORPORATION
(Exact name of Registrant as specified in its charter)
__________________________________________________________________________________________________
Delaware 04-3523891
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
100 Nagog ParkActonMassachusetts 01720
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (978600-7000
________________________________________________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par Value Per SharePODDThe NASDAQ Stock Market, LLC

As of July 30, 2020, the registrant had 65,650,528 shares of common stock outstanding.




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Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
INSULET CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except share and per share data)June 30, 2020December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents$779.1  $213.7  
Short-term investments65.3  162.4  
Accounts receivable trade, less allowance for credit losses of $4.6 and $3.8
78.0  69.3  
Inventories103.7  101.0  
Prepaid expenses and other current assets59.6  44.6  
Total current assets1,085.7  591.0  
Long-term investments23.5  58.4  
Property, plant and equipment, net423.2  399.4  
Other intangible assets, net10.9  13.2  
Goodwill39.6  39.8  
Other assets43.8  41.1  
Total assets$1,626.7  $1,142.9  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable$35.6  $54.5  
Accrued expenses and other current liabilities98.8  103.2  
Total current liabilities134.4  157.7  
Convertible debt, net910.2  887.9  
Other liabilities18.8  21.4  
Total liabilities1,063.4  1,067.0  
Commitments and contingencies (Note 9)
Stockholders’ Equity
Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding
    
Common stock, $.001 par value, 100,000,000 authorized; 65,604,347 and 62,685,492 issued and outstanding
0.1  0.1  
Additional paid-in capital1,227.6  749.0  
Accumulated deficit(660.8) (672.0) 
Accumulated other comprehensive loss(3.6) (1.2) 
Total stockholders’ equity563.3  75.9  
Total liabilities and stockholders’ equity$1,626.7  $1,142.9  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INSULET CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 Three Months Ended June 30,Six Months Ended June 30,
(in millions, except share and per share data)2020201920202019
Revenue$226.3  $177.1  $424.3  $336.7  
Cost of revenue83.8  60.7  154.9  113.6  
Gross profit142.5  116.4  269.4  223.1  
Research and development expenses34.2  33.0  69.7  65.5  
Selling, general and administrative expenses80.8  75.8  164.7  142.7  
Operating income27.5  7.6  35.0  14.9  
Interest expense, net(11.1) (5.8) (21.2) (10.6) 
Other income, net1.0  0.1  1.0  2.3  
Income before income taxes17.4  1.9  14.8  6.6  
Income tax expense(3.0) (0.5) (2.5) (0.8) 
Net income$14.4  $1.4  $12.3  $5.8  
Net income per share:
Basic$0.22  $0.02  $0.19  $0.10  
Diluted$0.22  $0.02  $0.19  $0.09  
Weighted-average number of common shares outstanding:
Basic64,370,791  59,844,991  63,627,231  59,601,365  
Diluted65,578,513  61,486,325  64,970,187  61,332,451  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INSULET CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 Three Months Ended June 30,Six months ended June 30,
(in millions)2020201920202019
Net income$14.4  $1.4  $12.3  $5.8  
Other comprehensive income (loss), net of tax:
Currency translation adjustment0.6  (0.4) (2.8) (1.2) 
Unrealized (loss) gain on available-for-sale debt securities(0.4) 0.7  0.4  1.3  
Total other comprehensive income (loss), net of tax0.2  0.3  (2.4) 0.1  
Comprehensive income$14.6  $1.7  $9.9  $5.9  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INSULET CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)

Three Months Ended June 30, 2020
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(in millions, except share data)SharesAmount
Balance at March 31, 202063,057,874  $0.1  $737.9  $(675.2) $(3.8) $59.0  
Issuance of common stock2,369,668  —  477.5  —  —  477.5  
Exercise of options to purchase common stock131,542.0  —  5.1  —  —  5.1  
Issuance of employee stock purchase plan18,685  —  2.9  —  —  2.9  
Stock-based compensation—  —  5.8  —  —  5.8  
Restricted stock units vested, net of shares withheld for taxes26,578  —  (1.6) —  —  (1.6) 
Net income—  —  —  14.4  —  14.4  
Other comprehensive income—  —  —  —  0.2  0.2  
Balance at June 30, 202065,604,347  $0.1  $1,227.6  $(660.8) $(3.6) $563.3  

Three Months Ended June 30, 2019
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(in millions, except share data)SharesAmount
Balance at March 31, 201959,638,439  $0.1  $905.8  $(679.2) $(3.1) $223.6  
Exercise of options to purchase common stock447,214  —  14.6  —  —  14.6  
Issuance for employee stock purchase plan27,613  —  2.0  —  —  2.0  
Stock-based compensation—  —  8.3  —  —  8.3  
Restricted stock units vested, net of shares withheld for taxes36,660  —  (0.4) —  —  (0.4) 
Net income—  —  —  1.4  —  1.4  
Other comprehensive income—  —  —  —  0.3  0.3  
Balance at June 30, 201960,149,926  $0.1  $930.3  $(677.8) $(2.8) $249.8  


The accompanying notes are an integral part of these condensed consolidated financial statements.
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Six Months Ended June 30, 2020
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(in millions, except share data)SharesAmount
Balance at December 31, 201962,685,492  $0.1  $749.0  $(672.0) $(1.2) $75.9  
Adoption of ASU 2016-13 (Note 1)  —  —  (1.1) —  (1.1) 
Issuance of common stock2,369,668  —  477.5  —  —  477.5  
Exercise of options to purchase common stock304,374  —  11.3  —  —  11.3  
Issuance for employee stock purchase plan18,685  —  2.9  —  —  2.9  
Stock-based compensation—  —  13.7  —  —  13.7  
Restricted stock units vested, net of shares withheld for taxes226,128  —  (26.8) —  —  (26.8) 
Net income—  —  —  12.3  —  12.3  
Other comprehensive loss—  —  —  —  (2.4) (2.4) 
Balance at June 30, 202065,604,347  $0.1  $1,227.6  $(660.8) $(3.6) $563.3  

Six Months Ended June 30, 2019
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
(in millions, except share data)SharesAmount
Balance at December 31, 201859,188,758  $0.1  $898.5  $(683.6) $(2.9) $212.1  
Exercise of options to purchase common stock716,687  —  23.6  —  —  23.6  
Issuance for employee stock purchase plan27,613  —  2.0  —  —  2.0  
Stock-based compensation—  —  14.1  —  —  14.1  
Restricted stock units vested, net of shares withheld for taxes216,868  —  (7.9) —  —  (7.9) 
Net income—  —  —  5.8  —  5.8  
Other comprehensive income—  —  —  —  0.1  0.1  
Balance at June 30, 201960,149,926  $0.1  $930.3  $(677.8) $(2.8) $249.8  







The accompanying notes are an integral part of these condensed consolidated financial statements.
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INSULET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
(in millions)20202019
Cash flows from operating activities
Net income$12.3  $5.8  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization18.8  11.0  
Non-cash interest22.3  15.4  
Stock-based compensation13.7  14.1  
Provision for credit losses2.6  2.0  
Other  (0.6) 
Changes in operating assets and liabilities:
Accounts receivable(13.8) (7.0) 
Inventories(2.8) (14.0) 
Prepaid expenses and other assets(14.0) (1.5) 
Accounts payable, accrued expenses and other current liabilities(13.9) (3.5) 
Other liabilities(2.4) (1.3) 
Net cash provided by operating activities22.8  20.4  
Cash flows from investing activities
Capital expenditures(51.7) (91.9) 
Acquisition of intangible assets(0.5) (5.0) 
Purchases of investments(37.9) (39.1) 
Receipts from the maturity or sale of investments170.7  104.2  
Net cash provided by (used in) investing activities80.6  (31.8) 
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs477.5    
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan14.2  25.6  
Payment of withholding taxes in connection with vesting of restricted stock units(26.8) (7.9) 
Net cash provided by financing activities464.9  17.7  
Effect of exchange rate changes on cash(2.9) (0.3) 
Net increase in cash, cash equivalents and restricted cash565.4  6.0  
Cash, cash equivalents and restricted cash at beginning of period213.7  113.9  
Cash, cash equivalents and restricted cash at end of period$779.1  $119.9  
Supplemental cash flow information:
Purchases of property and equipment included in accounts payable and accrued expenses$4.5  $3.0  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INSULET CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements reflect the consolidated operations of Insulet Corporation and its subsidiaries (“Insulet” or the “Company”). The unaudited consolidated financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from those estimates. In management’s opinion, the unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the interim results reported. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020, or for any other subsequent interim period.
The year-end balance sheet data was derived from audited consolidated financial statements. These unaudited consolidated financial statements do not include all of the annual disclosures required by GAAP; accordingly, they should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable consist of amounts due from third-party payors, customers and intermediaries and are presented at amortized cost. The allowance for credit losses reflects an estimate of losses inherent in the Company’s accounts receivable portfolio determined based on historical experience, specific allowances for known troubled accounts and other available evidence. Accounts receivable are written off when management determines they are uncollectable.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:
Direct Customer Receivables—The Company measures expected credit losses on direct customer receivables using an aging methodology. The risk of loss for direct customer receivables is higher than other portfolios. The Company relies on third-party payors to accept and timely process claims and on direct consumers to have the ability to pay. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.
Distributor Receivables—The Company measures expected credit losses on distributor receivables using an individual reserve methodology. The risk of loss in this portfolio is low based on the Company’s historical experience. The estimate of expected credit losses considers payment history as well as credit ratings of the distributors, in addition to current conditions and supportable forecasts.
National Healthcare System Receivables—The Company measures expected credit losses on national healthcare system receivables using an individual reserve methodology. The risk of loss in this portfolio is low based on the Company’s historical experience. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.
Shipping and Handling Costs
Shipping and handling costs are included in selling, general and administrative expenses and were $1.9 million and $2.3 million for the three months ended June 30, 2020 and 2019, respectively, and were $3.8 million and $4.9 million for the six months ended June 30, 2020 and 2019, respectively.
Fair Value Measurements
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. To measure fair value of assets and liabilities, the Company uses the following fair value hierarchy based on three levels of inputs:
Level 1—observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2—significant other observable inputs that are observable either directly or indirectly; and
Level 3—significant unobservable inputs for which there are little or no market data, which require the Company to develop its own assumptions.
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Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity. See Notes 3 and 8 for financial assets and liabilities held at carrying amount on the consolidated balance sheet and Note 4 for investments measured at fair value on a recurring basis.
Reclassification of Prior Period Amounts
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. A portion of facility costs and certain information technology costs have been allocated from selling, general and administrative to research and development expenses based on square foot and system usage, respectively. In addition, certain quality assurance costs were reclassified from research and development expenses to selling, general and administrative expenses. The net impact of these adjustments was a $0.7 million and $1.3 million increase to research and development expenses and a corresponding decrease to selling, general and administrative expenses for the three and six months ended June 30, 2020, respectively. There was no change to previously reported operating or net income. Further, the Company reclassified the $1.6 million change in unbilled receivables from the change in accounts and unbilled receivables to the change in prepaid expenses and other assets in the prior year statement of cash flows. This reclassification had no effect on previously reported net cash provided by operating activities.
Recently Adopted Accounting Standards
Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 requires financial assets measured at amortized cost, such as the Company’s trade receivables and contract assets, to be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions and future expectation for each pool of similar financial assets. The new guidance also requires enhanced disclosures related to trade receivables and associated credit losses. The Company adopted ASU 2016-13 using the modified retrospective method, whereby the guidance is applied prospectively as of the date of adoption and prior periods are not restated. The cumulative effect of adopting ASU 2016-13 resulted in a $1.1 million increase to the opening balance of accumulated deficit upon adoption related to an increase in the allowance for credit losses on accounts receivable.
The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2020, comprised primarily of our direct consumer receivable portfolio. The allowance for credit losses of other portfolios is insignificant.
(in millions)Three Months Ended June 30, 2020Six Months Ended June 30, 2020
Credit losses at the beginning of the period$4.1  $3.8  
Effect of adoption  1.1  
Credit losses at the beginning of the period after adoption4.1  4.9  
Provision for expected credit losses2.0  2.6  
Write-offs charged against allowance(1.6) (3.1) 
Recoveries of amounts previously written-off0.1  0.2  
Credit losses at the end of the period$4.6  $4.6  
Effective January 1, 2020, the Company adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 requires an entity to measure the impairment of goodwill assigned to a reporting unit as the amount by which the carrying value of the assets and liabilities of the reporting unit, including goodwill, exceeds the reporting units’ fair value. The adoption of this guidance had no impact on the consolidated financial statements.
Note 2. Revenue and Contract Acquisition Costs
The following table summarizes the Company’s disaggregated revenues:
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2020201920202019
U.S. Omnipod$128.8  $98.1  $245.4  $184.2  
International Omnipod73.2  62.7  146.3  119.6  
Total Omnipod202.0  160.8  391.7  303.8  
Drug Delivery24.3  16.3  32.6  32.9  
Total$226.3  $177.1  $424.3  $336.7  
During both the three and six months ended June 30, 2020, the Company had two customers that represented 21% of total revenue. During the three and six months ended June 30, 2019, the Company had one customer that represented 12% of total revenue and two customers that represented 21% of total revenue, respectively.
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Deferred revenue related to unsatisfied performance obligations was included in the following consolidated balance sheet accounts in the amounts shown:
(in millions)
June 30, 2020December 31, 2019
Accrued expenses and other current liabilities$5.0  $3.2  
Other liabilities0.9  1.0  
Total deferred revenue$5.9  $4.2  
Revenue recognized during the three and six months ended June 30, 2020 included in deferred revenue at the beginning of 2020 was $0.1 million and $1.6 million, respectively. Revenue recognized during the three and six months ended June 30, 2019 included in deferred revenue at the beginning of 2019 was $0.2 million and $1.1 million, respectively.
Contract acquisition costs, representing capitalized commission costs related to new customers, net of amortization, were included in the following consolidated balance sheet captions in the amounts shown:
(in millions)June 30, 2020December 31, 2019
Prepaid expenses and other current assets$9.9  $9.5  
Other assets19.7  19.9  
Total capitalized contract acquisition costs, net$29.6  $29.4  
The Company had unbilled receivables of $22.3 million and $13.5 million at June 30, 2020 and December 31, 2019, respectively.
The Company recognized $2.6 million and $5.1 million of amortization of capitalized contract acquisition costs during the three and six months ended June 30, 2020, respectively. The Company recognized $2.1 million and $4.1 million of amortization of capitalized contract acquisition costs during the three and six months ended June 30, 2019, respectively.
Note 3. Cash and Cash Equivalents
The following table provides a summary of cash and cash equivalents and the level in the fair value hierarchy in which those measurements fall:
June 30, 2020December 31, 2019
(in millions)TotalLevel 1Level 2TotalLevel 1
Level 2 (1)
Cash$470.3  $470.3  $  $85.3  $85.3  $  
Money market mutual funds305.9  305.9    115.5  115.5    
Commercial paper      10.0    10.0  
Restricted cash2.9  2.9    2.9  2.9    
Total cash and cash equivalents$779.1  $779.1  $  $213.7  $203.7  $