Insulet (NASDAQ:PODD) reported fourth-quarter and full-year 2016 earnings after the market closed on Monday. The drug delivery company, which is a leader in tubeless insulin pump technology with its Omnipod Insulin Management System, delivered solid revenue growth of 24% -- which exceeded its guidance -- while its loss per share narrowed significantly.

Insulet's stock has gained nearly 45% for the one-year period through the regular trading session on Monday, versus the S&P 500's total return of 24%. 

Insulet's key quarterly numbers 


Q4 2016

Q4 2015

Year-Over-Year Change


$103.6 million

$83.8 million 


Operating income

($4.1 million)  ($12.6 million)   N/A

Net income from continuing operations

(9.2 million)  ($15.9 million)   N/A

Net income

($9.1 million) ($27.3 million)   N/A

Earnings per share (EPS)

($0.16)  ($0.48)   N/A

EPS adjusted for discontinued operations

($0.16)  ($0.28)   N/A

Data source: Insulet.

For the full-year 2016, Insulet's revenue increased 39% to $367.0 million, operating loss was $10.7 million, net loss from continuing operations was $27.2 million, and loss per share adjusted for discontinued operations was $0.48. 

Investors should focus on the results adjusted for discontinued operations, which exclude results from Insulet's Neighborhood Diabetes supplies business, which the company sold in the first quarter of 2016 to focus on its primary business.

Quarterly revenue exceeded the company's guidance of $99 million to $102 million. Insulet doesn't issue earnings guidance, but analysts expected Insulet to post a loss of $0.05 per share on revenue of $100.6 million, so Insulet's earnings fell short of expectations, while its revenue beat the consensus. While long-term investors shouldn't pay too much attention to Wall Street's near-term estimates, they can be helpful to know because, along with forward guidance, they often help explain market movements -- and indeed, the stock did fall slightly as investors digested the results. 

An Omnipod on a woman's stomach and its controlling/monitoring device.

Image source: Insulet.

Revenue breakdown by business

  • U.S. Omnipod: Revenue increased 17% to $63.1 million.
  • International Omnipod: Revenue jumped 35% to $20.8 million.
  • Drug delivery: Revenue grew 34% to $19.6 million. Growth in this business is largely being driven by Amgen's Neulasta Onpro kit, which includes Insulet's Omnipod tech and was approved by the FDA just before the start of 2015.

What happened with Insulet this quarter?

  • Gross margin increased a whopping 8.7 percentage points to 58.8%, driven by continued improvements in manufacturing and operational execution. The company's goal is to achieve a gross margin of at least 65% over the coming years. CEO Patrick Sullivan said during last quarter's conference call that the key driver of the gross margin expansion will be the automated manufacturing operation in the U.S. that the company is now establishing. 
  • Completed Investigational Device Exemptions (IDE) for its Omnipod Horizon Automated Glucose Control System, demonstrating overall excellent glucose control in more than 50 adults and children.
  • Renewed drug delivery supply agreement with Amgen.
  • Renewed contract manufacturing agreement with Flextronics in China.
  • While not in the fourth quarter, it's worth noting that in February, Insulet purchased a facility in Acton, Massachusetts, that will be used to expand Omnipod manufacturing and capacity. Insulet expects the facility will provide capacity for it to manufacture up to 70% more pods on a single line with up to 90% fewer workers as compared to all four of its current manufacturing lines at Flextronics, its contract manufacturer in China. Production is expected to begin in 2019.

What management had to say

CEO Patrick Sullivan commented in the press release on Insulet's results in 2016:

We continue to successfully execute on our strategy, as evidenced by our 2016 revenue results, which exceeded our expectations. With our differentiated platform and outstanding commercial and operational execution, we achieved significant growth across all business lines, driving 39% revenue growth and a seven-point gross margin improvement year-over-year.

Sullivan also commented on Insulet's future ambitions: 

Insulet is very well positioned for continued growth in 2017. We remain focused on our large, unpenetrated market opportunity in the diabetes space and are on track to achieve our five-year targets of $1 billion in revenue and 65% gross margin, which we believe will deliver substantial returns for shareholders. 

Looking ahead

In short, Insulet's key numbers continued to move in the right direction in the quarter and the year. The company projects solid revenue growth for 2017, as per the chart below. Once the Acton, Massachusetts, facility is up and running -- expected in 2019 -- investors should see a nice increase in efficiencies and gross margin.


Revenue Guidance

Projected Year-Over-Year Change

Q1 2017

$96 million to $99 million

20% at midpoint of range

FY 2017

$420 million to $440 million 

17% at midpoint of range

Data source: Insulet.

This outlook should please Wall Street, which was estimating going into the earnings release that Insulet would post first-quarter and full-year 2017 revenue of $97.0 million and $425.3 million, respectively.