No. of Recommendations: 1
Hey fools,

Well, its that time again! Who is ready for some fun?


And the official link to the press release:

As a reminder, here are the estimates set by the analysts before the release:

Management guidance:
Revenue: 56-59 million
Gross margin: 44%

Analysts were expecting:
Revenue - 57.26 MM
Earnings per share – (0.21)

Revenue: $57.4 (beat) (+20% year over year)
Earnings per share – (0.20) (beat)
Gross margin – 44% (in line)

Clearly, the analysts like the results, as the stock is up 14% today to $28.46 as i write this.

Now, lets dig in to the CEO prepared comments. I’ll just hit the high points:
- New OmniPod adoption has been great, referrals and shipments up 40% in March, and 50% in april
- 10% of shipments from practices that did not prescribe an OmniPod in 2012
- Delayed shipments to current omnipod patients by 90 days, due to increased demand and an unexpected component issue (which has been fixed). Shipments will go out in next few weeks
- New partnership with Lilly for U-500 insulin, 2 million potential patients, doubling our current market size of 1.5 million type 1’s
- Human trials for OmniPod/CGM in 2014
- Operating cash profitable in Q1, 2 Million net cash loss
- On track for operating profitable by year end

Now, CFO remarks:
- Revenue up 20% to $57.4 Million, OmniPod revenue up 25%, offset by lower re-orders due to customers delaying until new pod is available.
- Gross profit up 24% to $25.2 MM
- Gross margin 44%, up 100 basis points (.01% = 1 basis point) year over year (yoy)
- Gross margin should be 44% in q2 as we give away new PDM’s for free (makes sense to me)
- 60% Gross margin on US omnipod business by year end, and blended 50% gross margin by year end
- Operating expenses flat from q4, should increase for rest of 2013 as we expand sales & marketing
- Operating loss declined 40% to $10.9 MM
- Operating cash profitable for entire quarter (hooray!)
- Interest expense $4.3 MM, $2.9MM non-cash
- Net loss of $10.7 MM, or -0.20 per share
- Cash of $148.1 MM, total cash burn $2MM
- 53.3 MM shares outstanding

Q2 revenue of 59 to 62 MM (analysts right now are at $60.99 MM)
Full year revenue of $240-255 MM (analysts right now are at $249.11 MM)

Just for fun (yes, this is fun for nerds like me), I’ve decided to include some new graphics in my updates, which make it easier to see progress going forward.

2014 2013 2012 2011
Q1 57.40 47.7
Q2 60.99e 51
Q3 54.7
Q4 57.8 47
296.5e 249.11e 211.37 96.9

And for EPS (earnings per share)

2014 2013 2012 2011
Q1 -0.20 -0.31
Q2 -0.19e -0.30
Q3 ? -0.26
Q4 ? -0.21 -0.3
0.01e -0.59e -1.08

OK, now comes question time from the analysts. Rather than list them all, I’ll just throw in the ones I think are most important.

1) Can gross margin expand beyond 60%? Assuming a $28 asp (average selling price), 65% are still doable in 2014 and beyond
2) Competitive bidding update on Neighborhood strip business? Lots of noise in Washington about pushing it back to December, but our guidance is assuming July 1 start.
3) More details about the supply distuption? Solved, we are confident, we are shutting down old omnipod line this month.
4) Attrition rate? Down slightly
5) Who found the component problem? Our quality team. (awesome job quality team! Better to not ship then ship bad product. Thank you!!!)
6) Big shipment pent up demand or new? Hard to say, but expanding base of prescriber exciting.
7) More info on CGM? Sterilization remains the hurdle for us to clear before we invest.
8) Sensor accuracy? Comparable to market today, otherwise we won’t go forward.
9) International business numbers? Up 300%.

Overall, this business continues to hum along, and 2013 should prove to be an exciting year for PODD. Its had a hell of a good run recently, so I wouldn't be foaming at the mouth to add shares now, but certainly worth keeping an eye on down the road.

SA/RB Welcome Fool
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