Insulet (NASDAQ:PODD) reported solid third-quarter 2017 financial results after the market closed on Thursday.

The drug delivery company, which is a leader in tubeless insulin pump technology with its Omnipod Insulin Management System, delivered revenue growth of 28% -- which exceeded its guidance -- while its loss per share narrowed. The company also raised its revenue guidance for 2017, as it did in both the first and second quarters. 

Shares of Insulet have gained 54.2% in 2017 through Thursday, far outpacing the S&P 500's total return of 17.3%.

Insulet's results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$121.8 million

$94.9 million

28%

Operating income

$2.0 million

$2.4 million

(17%)

Net income

($2.2 million)

($3.0 million)

N/A

Earnings per share (EPS)

($0.04)

($0.05)

N/A

Data source: Insulet.

Revenue exceeded the company's guidance of $112 million to $116 million. Insulet doesn't provide earnings guidance. Revenue growth continued to also accelerate sequentially, as revenue jumped 25% and 26%, respectively, in the first and second quarters. 

The decline in operating income was due to a significant increase -- 47% -- in research and development (R&D) expense over the year-ago quarter. 

For additional context -- though long-term investors shouldn't give too much importance to Wall Street's near-term estimates -- analysts were looking for a loss of $0.10 per share on revenue of $114.4 million. So Insulet comfortably beat the consensus on both the top and bottom lines.

Two-panel image: Uppers shows an Omnipod on a woman's stomach and lower shows the control device in a woman's hand.

Image source: Insulet.

What happened with Insulet in the quarter?

  • U.S. Omnipod's revenue increased 17% year over year to $70.1 million.
  • International Omnipod's revenue surged 70% to $32.5 million.
  • Drug delivery's revenue grew 19% to $19.2 million. Growth continues to be largely driven by Amgen's Neulasta Onpro kit, which includes Insulet's Omnipod tech. COO Shacey Petrovic said on the conference call that Amgen's sales of its Onpro kit reached 56% of the U.S. Neulasta doses at the end of the third  quarter. 
  • Gross margin was 60.5%, up 180 basis points (1.8 percentage points) from the year-ago quarter, due to continued improved manufacturing and operational performance. Last quarter, the company upped its long-term gross margin target from 65% to 70% due to its plans to transition in July 2018 to a direct distribution model in Europe.
  • The company broke ground at the site of its new, state-of-the-art manufacturing facility in Acton, Mass.
  • Insulet presented real-world data, at the European Association for the Study of Diabetes meeting in Lisbon, Portugal, showing the benefit of the use of Omnipod in approximately 39,000 patients using a cloud-based data management system.

What management had to say

Here's what CEO Patrick Sullivan had to say in the press release:

We achieved strong third quarter results across all of our businesses, particularly in our international business. In addition to our 28% revenue growth, we achieved a 180-basis point improvement in gross margin. We are well on our way to our fiscal 2021 targets of $1 billion in revenue and approaching 70% gross margin. We are pleased with our progress in product innovation and the growing body of clinical data supporting the many benefits of our Omnipod System, as highlighted at the European Association for the Study of Diabetes conference in September. In the third quarter, we broke ground at our new, state-of-the-art manufacturing facility in Massachusetts, which will create manufacturing redundancy and improve operating efficiencies and product quality.

Looking ahead

Insulet turned in another solid quarter. The company once again increased its revenue guidance range for 2017, and also established fourth-quarter guidance as follows:

Period

Updated Revenue Guidance

Previous Revenue Guidance

Year-Over-Year Change

Q4 2017

$123 million to $126 million

N/A

20% at midpoint of range

Full-year 2017

$456 million to $459 million

$440 million to $450 million

25% at midpoint of range

Data source: Insulet.

Going into the earnings release, Wall Street was estimating that Insulet would post third-quarter revenue of $120.9 million -- less than the lower end of the company's guidance range.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends Insulet. The Motley Fool has a disclosure policy.