Insulet Delivers Healthy Q2 Revenue Growth; Stock Pumps Up Nearly 9%

By Markets Fool.com

Insulet(NASDAQ: PODD)reported its second-quarter 2016 earnings after the market closed on Wednesday. The drug delivery company, which is a leader in tubeless insulin pump technology with its OmniPod System,delivered revenue growth that exceeded its expectations, and the company upped its full-year 2016 revenue guidance.

Continue Reading Below

Shares of Insulet pumped up 10% in after-hours trading on Wednesday, which bodes well for their performance during the regular trading session on Thursday. The stock has gained more than 5% over the one-year period through Wednesday, roughly in line with the S&P 500's total return.

Insulet's key Q2 numbers

Metric

Q2 2016

Q2 2015

Growth (YOY)

Revenue

$87.3 million

$60.6 million

44.1%

Operating income

($1.3 million)

($14.1 million)

90.8%

Net income

($4.2 million)

($15.4 million)

72.7%

Net income from continuing operations

($4.4 million)

($17.3 million)

74.6%

Earnings per share

($0.08)

($0.27)

70.4%

Earnings per share adjusted for discontinued operations

($0.08)

($0.30)

73.3%

YOY = year over year. Data source: Insulet.

Revenue exceeded the company's guidance of $81 million to $84 million. Insulet does not provide earnings guidance.

Continue Reading Below

Wall Street was expecting an adjusted EPS loss of $0.17 on revenue of $81.19 million, so Insulet comfortably beat revenue estimates and crushed earnings estimates. Long-term investors shouldn't paytoo much attention to analysts' estimates since Wall Street is focused on the short term. However, they can be helpful to keep in mind because they often help explain market reactions.

Image source: Insulet.

Revenue breakdown by business

  • U.S. OmniPod: Revenue increased 24% to $56.3 million.
  • International OmniPod: Revenue jumped 117% to $16.6 million.
  • Drug delivery: Revenue soared 92% to $14.4million. As with last quarter, this increase was largely driven by the success ofAmgen'sNeulasta Onpro kit, which includes Insulet's OmniPod technology. CEO Patrick Sullivan stated that Amgen said on its earnings call last week that this product now represents 40% of its Neulasta business. This is rapid adoption since the product was approved by the FDA just before the start of 2015.

What happened with Insulet this quarter?

  • Gross margin rose to 57.8%, up over 700 basis points, reflecting significant manufacturing and operational improvements.
  • New data demonstrating the benefits of the Omnipod System for people with Type 1 and Type 2 diabetes was publishedin theJournal of Diabetes Science and Technology and at the American Diabetes Association's 76thScientific Session.
  • Insulet opened a new Innovation Center of Excellence in San Diego focused on product development.
  • It's increasing its digital chops at its Boston and San Diego locations by hiring talent with skill sets in mobile apps, data analytics, algorithms, and user experience. Thisis in advance of the company's plans to introduce a fully connected OmniPod System followed by a best-in-class artificial pancreas system.

What management had to say

Sullivan said the following in the press release:

[W]e are incredibly pleased to see the benefits of our commercial and operational initiatives demonstrated in our strong results. Our continued positive momentum generated better than expected revenue growth and margin improvement in the second quarter, with growth in all of our business lines. We are advancing our Digital Insulet strategy and artificial pancreas program, while also successfully growing the body of clinical evidence in support of our Omnipod technology. Our investments in our manufacturing and supply chain operations are beginning to pay off and based on these improvements, we expect higher-than-planned gross margin for the year.

Looking ahead

Insulet hiked its full-year 2016 revenue guidance and established Q3 revenue guidance as follows:

Period

Revenue Guidance

Pro Forma* Growth (YOY)

Q3 2016

$88 million to $91 million

25% at mid-point of range

FY 2016

$345 million to $355 million (up from $330 million to $350 million)

33% at mid-point of range

Data source: Insulet. *Pro forma growth excludes 2015 revenue contributed by Neighborhood Diabetes, which Insulet sold in Feb. 2016.

Going into earnings, analysts were projecting Q3 and full-year 2016 revenue of $85.23 million and $337.37 million, respectively. That means that even the lower end of Insulet's guidance for both numbers comfortably exceeds Wall Street's estimates.

Sullivan said on the call that Insulet is on track to grow its worldwide installed base of OmniPod Systems by 20% in 2016, consistent with its previous guidance.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends Insulet. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.