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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included in this annual report. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs, which are subject to risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed under the headings “Risk Factors” and “Forward-Looking Statements.”

Overview

Our mission is to improve the lives of people with diabetes. We are primarily engaged in the development, manufacture, and sale of our proprietary continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod platform, includes: Classic Omnipod, its next generation Omnipod DASH, the most recent generation Omnipod 5, and our latest innovation, Omnipod GO, which received U.S. Food and Drug Administration (“FDA”) clearance in 2023, all of which eliminate the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing. Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like PDM with a color touch screen user interface. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system that integrates with a continuous glucose monitor (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. The CGM is sold separately by a third party. Omnipod GO, for which we are currently conducting a pilot program in the United States, is our basal-only Pod for individuals with type 2 diabetes age 18 and older who require insulin.

Our long-term financial objective is to sustain profitable growth. To achieve this goal, we launched Omnipod 5 in the United States in August 2022 and in the United Kingdom and Germany in June and August 2023, respectively. Subsequent to the launch of Omnipod 5, we began to phase-out our Classic Omnipod in the U.S. in 2023, since the vast majority of our U.S. customer base is no longer using this product.

We are working on further building our international teams and advancing our regulatory, reimbursement, and market development efforts so we can bring Omnipod 5 to additional international markets. We plan to launch Omnipod 5 in more European markets in 2024 starting with the Netherlands. Additionally, in December 2023, we completed enrollment for our pivotal trial for Omnipod 5 with the goal of expanding Omnipod 5’s indication to type 2 users. We expect to complete the trial and submit to the FDA for an expanded indication by the end of 2024.

We have completed a randomized control trial in the U.S. and France for Omnipod 5 with DexCom’s G6 continuous glucose monitor (“CGM”) to support our pricing and market access initiatives. We also continue to expand market access and awareness of Omnipod products through our direct to consumer advertising programs and through growing our presence in the U.S. pharmacy channel, where access to Omnipod 5 and Omnipod DASH is simpler and affordable, as no up-front investment is required.

We also continue to take steps to strengthen our global manufacturing capabilities. We recently completed construction of a new manufacturing plant in Malaysia to support our international expansion strategy, further ensure product supply, and drive higher gross margins over time. We expect to begin production at this new manufacturing facility in 2024.

Finally, we continue to focus on our product development efforts, including AID offerings such as choice of smartphone integration and CGM, and enhancing the customer experience through digital product and data capabilities. In February 2024, we began our limited market release of Omnipod 5 with Dexcom’s G7 CGM in the United States and received CE mark approval for the added compatibility of Libre 2 Plus with Omnipod 5 for individuals aged two years and older with type 1 diabetes. We expect to launch a limited market release of Omnipod 5 with Libre 2 Plus in the U.K. and the Netherlands in 2024. Additionally, we received FDA clearance for the Omnipod 5 App for iPhone in the fourth quarter of 2023 and plan to launch a limited market release in the U.S. in 2024.

Results of Operations

The discussion of our results of operations for 2021 has been omitted from this Form 10-K but can be found in Item 7. Management’s Discussion and Analysis and Results of Operations in our Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on February 24, 2023.

Factors Affecting Operating Results

Our Pod is intended to be used continuously for up to three days, after which it is replaced with a new disposable Pod. We recently achieved a milestone of approximately 425,000 estimated active global customers using Omnipod products, including approximately 250,000 global customers using Omnipod 5. Our product’s unique patented design allows us to provide Pod therapy at a relatively low or no up-front investment in regions where reimbursement allows for it and our pay-as-you-go

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pricing model reduces the risk to third-party payors. As we grow our customer base, we expect to generate an increasing portion of our revenues through recurring sales of our disposable Pods, which provide recurring revenue.

In 2022, we issued two voluntary Medical Device Corrections (“MDCs”), one in October for our Omnipod DASH PDM related to its battery and the other in November for our Omnipod 5 Controller related to its charging port and cable. During 2022, we initially recorded a net charge of $57.9 million related to these MDCs. During the year ended December 31, 2023, we recorded $11.5 million of income associated with a change in our estimated liability for the MDCs, primarily due to lower distribution costs.

We continue to experience challenges stemming from the global supply chain disruption; however, while there is no guarantee of future performance, to date we have been able to successfully mitigate this disruption and ensure uninterrupted supply to our customers by increasing our inventory levels and taking other measures. While our mitigation efforts and inflation have and are expected to continue to negatively impact gross margins and net income in 2024, we intend to continue to work to improve productivity to help offset these costs.

Comparison of the Years Ended December 31, 2023 and December 31, 2022

Revenue

Years Ended December 31,

(in millions) 2023 2022 % Change Currency Impact Constant Currency(1)

(1) Constant currency revenue growth is a non-GAAP financial measure which should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. See “Management’s Use of Non-GAAP Measures.”

Total revenue for 2023 increased $391.8 million, or 30.0%, to $1,697.1 million, compared with $1,305.3 million in 2022. Constant currency revenue growth of 29.6% was primarily driven by higher volume and, to a lesser extent, favorable sales channel mix, partially offset by decreased drug delivery revenue.

U.S.

Revenue from the sale of Omnipod products in the U.S. increased $366.2 million, or 41.4%, in 2023 to $1,251.0 million, compared with $884.8 million in 2022. This increase primarily resulted from higher volumes driven by growing our customer base and, to a lesser extent, growth through the pharmacy channel, where Pods have a higher average selling price due in part to the fact that we offer the PDM/Controller for no charge, and an increase in estimated inventory days-on-hand at distributors.

Revenue from the sale of Omnipod products in the U.S. includes $473.7 million of related party revenue in 2023, compared with $249.9 million in 2022. The $223.8 million increase primarily resulted from growth through the pharmacy channel. Additional information regarding our related party transactions is provided in Note 5 to our consolidated financial statements.

In 2024, we expect strong U.S. revenue growth driven by continued volume growth of Omnipod 5, continued sales of Omnipod DASH, and the benefits of our recurring revenue model and pharmacy channel access. We expect these increases to be partially offset by lower conversions from Classic Omnipod and Omnipod DASH to Omnipod 5 in the first half of the year compared to 2023 since the vast majority of conversions to Omnipod 5 occurred in 2023.

International

Revenue from the sale of Omnipod products in our international markets increased $47.1 million, or 13.0%, in 2023 to $410.1 million, compared with $363.0 million in 2022. Excluding the 1.6% favorable impact of currency exchange, the remaining 11.4% increase in revenue was primarily due to higher volumes as we continue to expand awareness and access to Omnipod DASH and, to a lesser extent, the timing of revenue recognition related to deferrals associated with our Omnipod DASH MDC and a technology upgrade program, and product mix from the launch of Omnipod 5 in the United Kingdom. These increases were partially offset by a decrease in estimated days-on-hand at distributors and higher attrition in the countries where we have not yet launched Omnipod 5 as we continue to be impacted by competition from AID systems.

In 2024, we expect higher International revenue due to continued volume growth driven by new customers and conversions to Omnipod 5 in the U.K. and Germany and to a lesser extent, the ongoing adoption of Omnipod DASH. We expect these increases to be partially offset by competition from AID systems.

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Drug Delivery

Substantially all of our Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy. Drug Delivery revenue for 2023 decreased $21.5 million, or 37.4%, to $36.0 million, compared with $57.5 million in 2022. This decrease primarily resulted from a lower forecast from our partner, partially offset by a higher selling price. In 2024, we expect Drug Delivery revenue to decline $18 million to $22 million due to a lower forecast from our partner.

Operating Expenses

Years Ended December 31,

(in millions) Amount Percent of Revenue Amount Percent of Revenue

Selling, general and administrative expenses $ 734.9 43.3 % $ 587.8 45.0 %

Cost of Revenue

Cost of revenue for 2023 increased $37.5 million, or 7.5%, to $537.2 million, compared with $499.7 million in 2022. Gross margin was 68.3% in 2023, compared with 61.7% in 2022. The 6.6 point increase in gross margin was primarily driven by the $57.9 million net charge associated with the voluntary MDC notices issued in 2022, which did not repeat in the current period, and an $11.5 million revision to the voluntary MDC liability in 2023, due to lower than expected distribution costs. The increase was also driven by higher average selling prices primarily due to growth in the pharmacy channel and improved manufacturing efficiencies. These increases were partially offset by higher production costs associated with Omnipod 5 and U.S. manufacturing as it continues to become a larger portion of total production, and to a lesser extent, continued inflation.

We expect gross margin for 2024 to be in the range of 68% to 69%. We anticipate gross margin to be relatively level due to higher average selling prices primarily due to growth in the pharmacy channel and improved manufacturing efficiencies, partially offset by $11.5 million of income associated with a reduction to our MDC liability in 2023, which will not recur, and higher costs associated with our new product launches.

Research and Development

Research and development expenses for 2023 increased $24.8 million, or 13.8%, to $205.0 million, compared with $180.2 million in 2022. This increase was primarily due to year-over-year headcount additions to support our continued investment in the development of Omnipod products and third-party costs to support clinical trials. Research and development expenses as a percent of revenue declined to 12.1% in 2023, compared with 13.8% in 2022 primarily due to an increase in sustaining costs following the launch of Omnipod 5 in the United States, which are included in selling, general and administrative expenses. We expect research and development spending in 2024 to increase compared with 2023 as we continue to invest in advancing our innovation and clinical pipeline.

Selling, General and Administrative

Selling, general and administrative expenses for 2023 increased $147.1 million, or 25.0%, to $734.9 million, compared with $587.8 million in 2022. This increase was primarily attributable to year-over-year headcount additions, mainly to support international growth and costs associated with our new leadership structure that is designed to accelerate innovation and commercialization. In addition, we had higher direct-to-consumer advertising spend and third-party customer service costs to support Omnipod 5 adoption, and an increase in software license fees driven by investments in new systems due to our growing business and increased headcount. To a lesser extent, the increase was due to higher amortization of cloud computing implementation costs and higher third-party training costs. These increases were partially offset by $27.3 million of legal costs incurred in the prior year related to the settlement of a patent infringement lawsuit, associated legal fees, and an estimated liability to settle a contract dispute.

We expect selling, general and administrative expenses to increase in 2024 compared with 2023 due to investments in our operating structure, primarily headcount additions, to facilitate continued growth, including customer support. Additionally, we plan to make additional investments to support our Omnipod platform, including market acceptance and access, and the phased launch of Omnipod 5 in our international markets.

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Non-Operating Items

Interest Expense and Income

Interest expense of $36.2 million in 2023 was level with interest expense of $36.0 million in 2022. Interest income for 2023 increased $19.3 million to $28.6 million, compared with $9.3 million in 2022. This increase was primarily driven by higher interest rates.

Other Income (Expense), Net

Other income of $2.2 million for 2023 consists primarily of $2.6 million of gains related to fair value adjustments associated with our strategic debt and equity investments.Other expense of $1.1 million for 2022 consists primarily ofnet unrealized and realized foreign currency losses.

Income Tax Expense

Income tax expense was $8.3 million on pre-tax income of $214.6 million for 2023 and $5.2 million on pre-tax income of $9.8 million for 2022. Our effective tax rate was 3.9% and 53.4% for 2023 and 2022, respectively. The decrease in our effective tax rate was primarily driven by an increase in pre-tax income in the U.S. where we have net operating loss carryforwards to reduce taxable profits and a full valuation allowance against deferred tax assets. Accordingly, we have not reported any tax benefit relating to the remaining net operating loss carryforwards and income tax credit carryforwards that are available for utilization in future periods.

We maintain a $202.9 million valuation allowance on net deferred tax assets at December 31, 2023. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of our valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period the release is recorded. However, the timing and amount of the valuation allowance release, if any, are unknown as this is subject to change on the basis of the level of profitability that we are able to actually achieve in future periods and other evidence that will be considered at the time of the assessment. Refer to Note 23 to our consolidated financial statements for additional information on our income tax expense.

In 2021, the Organization for Economic Co-operation and Development (“OECD”) and G20 international forum released the Model Global Anti-Base Erosion (GloBE) rules (“Model Rules”) under Pillar Two. These Model Rules set forth the common approach for a Global Minimum Tax at 15% for multinational enterprises with revenue greater than €750 million and is expected to be applicable to Insulet. In December 2022, Pillar Two was adopted by the Council of the European Union for implementation by European Union member states by December 31, 2023, with effect for tax years beginning in calendar year 2024. Similar directives under Pillar Two are already adopted or expected to be adopted by taxing authorities in other countries where Insulet has business operations, with widespread implementation of the Global Minimum Tax in calendar years 2024 and 2025. We are continuing to evaluate the Model Rules for Pillar Two and related legislation, and their potential impact on future periods.

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Adjusted EBITDA

The table below presents reconciliations of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”):

Years Ended December 31,

Interest expense, net 7.6 26.7

Income tax expense 8.3 5.2

Depreciation and amortization 72.8 63.2

Stock-based compensation expense 48.3 38.6

Voluntary medical device corrections(1) (11.5) 57.9

Unrealized gains on investments(2) (2.6) —

Legal costs(3) — 25.2

CEO transition costs(4) — 3.4

(1) Represents net (income) expense resulting from estimated costs associated with the voluntary MDC notices issued in the fourth quarter of 2022 and adjustments to those costs, which is included in cost of revenue. Refer to Note 14 to our consolidated financial statements for additional information.

(2) Represents non-operating gains related to fair value adjustments of strategic debt and equity investments.

(3) Includes a $20.0 million charge to settle patent infringement litigation with Roche, associated legal fees, and a $3.6 million charge to settle a contract dispute. Refer to Note 19 to our consolidated financial statements for additional information.

(4) Represents costs associated with the retirement and advisory services of our former chief executive officer, including $2.3 million of accelerated stock-based compensation expense.

Non-GAAP Financial Measures

Management uses the following non-GAAP financial measures:

Constant currency revenue growth represents the change in revenue between current and prior year periods using the exchange rate in effect during the applicable prior year period. We present constant currency revenue growth because we believe it provides meaningful information regarding our results on a consistent and comparable basis. Management uses this non-GAAP financial measure, in addition to financial measures in accordance with GAAP, to evaluate our operating results. It is also one of the performance metrics that determines management incentive compensation.

Adjusted EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and other significant transactions or events, such as legal settlements, medical device corrections, gains (losses) on investments, and loss on extinguishment of debt, which affect the period-to-period comparability of our operating performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, and other interested parties as a measure of our comparative operating performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.

These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.

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Liquidity and Capital Resources

Capitalization

The following table contains several key measures to gauge our financial condition and liquidity at the end of each year:

As of December 31,

Cash and cash equivalents $ 704.2 $ 674.7

Current portion of long-term debt $ 49.4 $ 27.5

Total stockholders’ equity $ 732.7 $ 476.4

Debt-to-total capital ratio 66 % 75 %

Net debt-to-total capital ratio 33 % 39 %

Convertible Debt

To finance our operations and global expansion, we have periodically issued convertible senior notes, which are convertible into our common stock. As of December 31, 2023, the following notes were outstanding:

(1) Per $1,000 face value of notes.

In connection with the issuance of the 0.375% Convertible Senior Notes (“0.375% Notes”), we purchased capped call options (“Capped Calls”) on our common stock. By entering into the Capped Calls, we expect to reduce the potential dilution to our common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the 0.375% Notes. The Capped Calls have an initial strike price of $335.90 per share and cover 3.5 million shares of our common stock.

Credit Agreement

We have a $300 million senior secured revolving credit facility (the “Revolving Credit Facility”), which expires in 2028. At December 31, 2023, no amount was outstanding under the Revolving Credit Facility. The Revolving Credit Facility contains a covenant to maintain a specified leverage ratio under certain conditions when there are amounts outstanding under the facility. It also contains other customary covenants, none of which are considered restrictive to our operations. Additionally, we have a seven year term loan, which matures in 2028, that contains covenants restricting or limiting our ability to incur additional indebtedness, make asset dispositions, create or permit liens, sell, transfer or exchange assets, guarantee certain indebtedness, and make acquisitions and other investments.

Additional information regarding our debt is provided in Notes 16 and 26 to the consolidated financial statements.

We believe that our current liquidity will be sufficient to meet our projected operating, investing, and debt service requirements for at least the next twelve months.

Summary of Cash Flows

Years Ended December 31,

Cash provided by (used in):

Financing activities (13.6) (40.3)

Effect of exchange rate changes on cash 1.8 (4.3)

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Operating Activities

Net cash provided by operating activities of $145.7 million in 2023 was primarily attributable to net income, as adjusted for depreciation and amortization and stock-based compensation expense, which was more than offset by a $190.6 million working capital cash outflow. The working capital outflow was driven by a $154.2 million increase in accounts receivable, a $53.6 million increase in inventories and a $42.1 million increase in prepaid expenses and other assets, partially offset by a $70.3 million increase in accrued expenses and other liabilities. The increase in accounts receivable was primarily due to an increase in sales in the U.S. pharmacy channel, which has longer payment terms. The increase in inventories was primarily driven by a planned inventory build to mitigate supply chain risk and satisfy demand. The increase in prepaid expenses and other assets was driven by an increase in prepaid cloud computing implementation and upgrade costs, subscription renewal costs, and other receivables. Finally, the increase in accrued expenses and other liabilities was primarily driven by an increase in accrued rebates mainly due to revenue growth in the pharmacy channel and an increase in compensation costs due to higher incentive compensation achievement and headcount additions, partially offset by warranty fulfillment associated with the voluntary MDCs issued in 2022.

Net cash provided by operating activities of $119.0 million in 2022 was primarily attributable to net income, as adjusted for depreciation and amortization and stock-based compensation expense, partially offset by a $2.5 million working capital cash outflow. The working capital outflow was driven by a $36.8 million increase in prepaid expenses and other assets, a $51.8 million increase in accounts receivable, and a $49.1 million increase in inventories, partially offset by a $137.6 million increase in accrued expenses and other liabilities. The increase in prepaid expenses and other assets was primarily driven by an increase in cloud computing implementation costs. The increase in accounts receivable was primarily due to an increase in sales in the U.S. pharmacy channel, which has longer payment terms, partially offset by a decrease in unbilled accounts receivable related to lower production volumes of our Drug Delivery product. The increase in inventories was primarily driven by a planned inventory build to satisfy demand. Finally, the increase in accrued expenses and other liabilities was primarily driven by the voluntary MDCs issued for our Omnipod DASH PDMs and Omnipod 5 Controllers, an increase in rebates due to growth in the pharmacy channel and an increase in compensation costs due to higher incentive compensation achievement and head count additions.

Investing Activities

We had $119.4 million of net cash used in investing activities in 2023, compared with $191.1 million in 2022.

Capital Spending—Capital expenditures were $75.6 million and $122.9 million in 2023 and 2022, respectively, and primarily related to the purchase of equipment to increase our manufacturing capacity. We expect capital expenditures for 2024 to increase compared with 2023 given the timing of spending on machinery, equipment and tooling for our new Malaysia manufacturing facility and to support continuous improvement efforts in our other manufacturing locations. To a lesser extent, we expect capital expenditures to increase due to investments in our information technology infrastructure. We expect to fund our capital expenditures using existing cash.

Investments in Developed Software—Investments in developed software were $8.5 million and $12.9 million in 2023 and 2022, respectively, and primarily related to investments in projects to support our cloud-based capabilities.

Acquisitions—In 2023, we paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based AID technologies. In 2022, we paid $26.0 million to acquire substantially all the assets related to the manufacture and production of shape-memory alloy wire assemblies that are used in the production of Pods from Dynalloy, Inc. and $21.5 million to acquire developed technology and patents from Automated Glucose Control LLC. The remaining $3.0 million purchase price for the Dynalloy acquisition was paid during 2023.

Investments—In 2023 and 2022, we made strategic investments in private companies in the amount of $7.2 million and $7.8 million, respectively.

Financing Activities

We had $13.6 million of net cash used in financing activities in 2023, compared with $40.3 million in 2022.

Debt Repayments—During 2023, we made principal payments totaling $27.0 million on our equipment financings, term loan, and mortgage, compared with $24.5 million of aggregate payments in 2022.

Prepayments of Finance Lease Obligation—During 2022, we made $15.3 million in upfront payments upon entering into an agreement to acquire real estate in Malaysia. Refer to Note 15 to the consolidated financial statements for additional information regarding this lease.

Proceeds from Option Exercises and Shares Issued Under Employee Stock Purchase Plan (“ESPP”)—Total proceeds from option exercises and issuance of shares under the ESPP were $26.9 million and $16.3 million in 2023 and 2022, respectively. The $10.6 million increase was primarily driven by option exercises by former executives.

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Payment of Taxes for Restricted Stock Net Settlements—Payments for taxes related to net restricted and performance stock unit settlements were $13.2 million and $16.8 million in 2023 and 2022, respectively. The $3.6 million decrease was primarily driven by lower achievement of the performance stock units that vested during 2023 (84% achievement in 2023 compared with 101% achievement in 2022).

Commitments and Contingencies

Contractual Obligations—A summary of our contractual obligations and commitments for debt, operating lease obligations and other obligations at December 31, 2023 is presented in the following table:

(in millions) Short Term Long Term Total

(1)Interest on debt and lease obligations are projected for future periods using the interest rates in effect as of December 31, 2023. Certain of these projected interest payments may differ in the future based on changes in market interest rates. Additional information regarding our leases is provided in Note 15 to the consolidated financial statements.

(2)Excludes the impact of the interest rate swaps discussed in Note 18 to our consolidated financial statements.

(3)Purchase obligations include commitments for the purchase of components for our products, commitments related to establishing additional manufacturing capabilities, and other commitments for purchases of goods or services in the normal course of business. These commitments are derived from purchase orders, supplier contracts and open orders based on projected demand information.

Off-Balance Sheet Arrangements

In 2022, the Company entered into a $20 million uncommitted letter of credit facility, and concurrently with the execution of an agreement to acquire real estate in Malaysia, a letter of credit of $16.5 million was issued under the facility to backstop a bank guarantee for the same amount. The bank guarantee serves as security for the building until the Company purchases the property. In 2023, additional letters of credit totaling $3.5 million were issued under this facility. In aggregate, we had letters of credit totaling $20.9 million and $18.6 million as of December 31, 2023 and 2022, respectively. Additional information regarding our letters of credit is provided in Note 19 to the consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on the relevant information available at the end of each period.

Revenue Recognition

We recognize revenue when a customer obtains control of the promised products in an amount that reflects the net consideration to which we expect to be entitled. We sell products both through distributors, who resell the products to consumers, and directly to consumers. Transaction price is typically based on contracted rates less any estimates of claim denials and historical reimbursement experience, guidelines and payor mix, and less estimated variable consideration adjustments, including rebates. Recognizing revenue requires us to exercise judgment and use estimates that can have a significant impact on the amount and timing of revenue we report. We exercise significant judgment when we determine variable consideration adjustments. The amount of variable consideration that is included in the transaction price is included in revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. We estimate reductions to our revenues for rebates paid to distributors in the United States and Canada and pharmacy benefit managers (“PBM”) in the United States. Rebates are based on contractual arrangements, which may vary. Our estimates are based on products sold, historical experience, trends, specific known market events and, as available, channel inventory data. Rebates charged against gross sales amounted to $465.5 million, $247.1 million and $143.3 million in 2023, 2022 and 2021, respectively. Provisions for rebates, sales discounts, and returns are accounted for as a reduction of sales when revenue is recognized and are included within accounts receivable trade or accrued expenses and other current liabilities on our consolidated balance sheets, based upon the recipient of the rebate. If the actual amounts of consideration that we receive differ from our estimates, we adjust our estimates, which affects reported revenue in the period that such variances become known.

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Our Drug Delivery product line includes sales of a modified version of the Pod to pharmaceutical and biotechnology companies who use our technology as a delivery method for their drugs. Revenue from the Drug Delivery product was $36.0 million for 2023. Revenue for this product line is recognized as the product is produced. Accounting for Drug Delivery revenue requires us to select a method to measure progress towards the satisfaction of the performance obligation. This election of the most meaningful measure of progress by which to recognize Drug Delivery revenue requires the application of judgment. We elected the input method and selected a blend of cost and time to produce as the measure of progress. Accordingly, revenue is recognized over time using a blend of costs incurred to date relative to total estimated costs at completion and time incurred to date relative to total production time to measure progress toward the satisfaction of our performance obligations. We believe that both incurred cost and elapsed time reflect the value generated, which best depicts the transfer of control to the customer. Contract costs include third-party costs as well as an allocation of manufacturing overhead. Changes from quarter to quarter in quantity and stage of production of in-process inventory could have a significant quarterly impact on revenue.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amount and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Significant judgement is required in determining whether it is probable that sufficient future taxable income will be available against which a deferred tax asset can be utilized. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including cumulative income in recent fiscal years, our forecast of future taxable income exclusive of certain reversing temporary differences and significant risks and uncertainties related to our business. In determining future taxable income, we are responsible for assumptions utilized including the amount of state, federal and international pre-tax operating income, the reversal of certain temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income in applicable tax jurisdictions, which are based on our commercial experience to date and are consistent with the plans and estimates that we are using to manage our underlying business.

As of December 31, 2023, we recorded a full valuation allowance of $202.9 million on our net deferred tax assets because realizability is not more likely than not. If we determine that the deferred tax assets are realizable in a future period, it would result in material changes to income tax expense in that period.

Product Warranty

We provide a four-year warranty on our PDMs and Controllers sold in the United States and Europe and a five-year warranty on PDMs sold in Canada. In addition, we may replace Pods that do not function in accordance with product specifications. We estimate our warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims, which include the current product cost, reclaim costs, shipping and handling costs and direct and incremental distribution and customer service support costs. Since we continue to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves. Changes to the actual replacement rates, which are evaluated quarterly, could have a material impact on our estimated warranty reserve.

Inventory Reserves

We reduce the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments, or other economic factors in order to state inventories at net realizable value. Factors influencing these adjustments include inventories on hand compared to estimated future usage and sales. During 2023, we charged $3.7 million to the consolidated statement of operations for excess and obsolete inventory. The determination of this charge involved assumptions regarding the number of PDMs expected to be utilized to satisfy warranty claims during the phase-out period and the length of time we will continue to offer Classic Omnipod outside the United States.

Accounting Standards Issued and Not Yet Adopted as of December 31, 2023

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires disclosure of incremental segment information on an annual and interim basis, including enhanced disclosures about significant segment expenses. We are required to comply with these new disclosure requirements beginning with our annual filing for 2024. The guidance is applied retrospectively. We do not plan to early adopt ASU 2023-07.

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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 includes improvements to income tax disclosures primarily related to information about rate reconciliation and income taxes paid. The new guidance requires disclosure of specific categories and greater disaggregation of information in the rate reconciliation and adds a requirement to disaggregate income taxes paid by jurisdiction. The new guidance also requires disclosure of pretax income disaggregated between domestic and foreign, income tax expense (or benefit) disaggregated by federal, state, and foreign, and removes certain existing disclosure requirements. We are required to comply with these new disclosure requirements beginning with our annual filing for 2025. The guidance may be applied on a prospective basis or retrospective basis. We do not plan to early adopt the requirements of ASU 2023-09.

Forward-Looking Statements

This Form 10-K contains forward-looking statements relating to future events or future financial performance that are based on management’s current expectations, estimates, and projections. Words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words or expressions are intended to identify these forward-looking statements. Forward-looking statements are only predictions and involve risks, uncertainties, and assumptions. Certain factors, including but not limited to those identified under “Item 1A. Risk Factors” of this Form 10-K, may cause actual results to differ materially from current expectations, estimates, projections, and forecasts, and from past results. You should not place undue reliance on any forward-looking statements. We expressly disclaim any obligation to update these forward-looking statements other than as required by law.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our exposure to changes in interest rates is associated with borrowings under our Revolving Credit Facility and our Term Loan, both of which are variable-rate debt. At December 31, 2023, no amounts were outstanding under our Revolving Credit Facility. In May 2021, we entered into two interest rate swap agreements to effectively convert $480.0 million of our term loan borrowings from a variable rate to a fixed rate. These interest rate swaps are intended to mitigate the exposure to fluctuations in interest rates and qualify for hedge accounting treatment as cash flow hedges. A 100 basis point increase or decrease in interest rates as of December 31, 2023 would decrease or increase our annual earnings, respectively, by approximately $0.1 million.

Market Price Sensitive Instruments

As of December 31, 2023, we had outstanding debt related to our convertible senior notes recorded on our consolidated balance sheet of $791.8 million, net of unamortized discount and issuance costs totaling $8.2 million. Changes in the fair value of our outstanding debt, which could be impacted by changes in interest rates, are not recorded in these consolidated financial statements as the debt is accounted for at cost less unamortized discount and issuance costs. The fair value of the convertible senior notes, which was $765.6 million as of December 31, 2023, is also impacted by changes in our stock price.

In order to reduce potential equity dilution, in connection with the issuance of the $800.0 million aggregate principal amount of 0.375% Notes, we entered into Capped Calls. We expect the Capped Calls to reduce the potential dilution to our common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the 0.375% Notes. The Capped Calls have an initial strike price of $335.90 per share and cover 3.5 million shares of common stock.

Foreign Currency Exchange Risk

Foreign currency risk arises from our investments in subsidiaries owned and operated in non-U.S. countries. Such risk is also a result of transactions with customers in countries outside the United States. Approximately 24% of our revenue was denominated in foreign currencies for the year ended December 31, 2023. As our business in regions outside of the United States continues to increase, we will be increasingly exposed to foreign currency exchange risk related to our foreign operations. The cost of revenue related to revenue generated outside of the United States is primarily denominated in U.S. dollars; however, operating costs related to these revenues are largely denominated in the same respective currencies, thereby partially limiting our transaction risk exposure. Fluctuations in the rate of exchange between the United States dollar and foreign currencies, primarily the Euro, British pound and Malaysia ringgit, could adversely affect our financial results, including our revenues, revenue growth rates, gross margins, income and losses as well as assets and liabilities.

We have intercompany receivables and payables from our foreign subsidiaries that are denominated in foreign currencies, principally the Euro, the British pound, Mexican peso, Malaysian ringgit and the Canadian dollar. Fluctuations from the beginning to the end of a reporting period result in the revaluation of our foreign currency-denominated intercompany receivables and payables, generating currency translation gains or losses. Net realized and unrealized gains (losses) from

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foreign currency transactions are included in other income (expense), net in the consolidated statement of operations and amounted to a loss of $0.4 million for the year ended December 31, 2023.

Item 8. Financial Statements and Supplementary Data

Our financial statements as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023, and the Report of the Registered Independent Public Accounting Firm are included in this report as listed in the index.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 43

Consolidated Balance Sheets as of December 31, 2023 and 2022 45

Notes to Consolidated Financial Statements 50

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Insulet Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2024 expressed an adverse opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinions.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Variable consideration – Rebates to pharmacy benefit managers

As described further in Note 2 to the financial statements, the Company provides for certain rebates for sales of its product through intermediaries. The Company estimates variable consideration related to rebates to pharmacy benefit managers in the United States when determining the transaction price at the time of sale. We identified the rebate estimate for pharmacy benefit managers as a critical audit matter.

The principal consideration for our determination that the rebate estimate related to pharmacy benefit managers is a critical audit matter was the high degree of auditor judgment in applying procedures to evaluate the significant estimation made by management. Management's estimate is based on historical experience adjusted for revenue growth, trends, specific known market events, and as available channel inventory data.

Our audit procedures related to the rebate estimate included the following, among others;

•Evaluated the significant assumptions and the completeness and accuracy of the underlying data used in management’s calculation through inspection of source documents and agreement to other audited schedules.

•Performed retrospective analysis comparing actual rebates incurred to the previously estimated amounts.

•We tested the design and operating effectiveness of controls related to management’s estimate.

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Income taxes – Realizability of the U.S. deferred tax assets

As described further in Note 23 to the financial statements, management records valuation allowances against deferred tax assets when a judgment is made, that it is more likely than not, that a tax benefit will not be realized. The realization of deferred tax assets is dependent upon the generation of future U.S. taxable income during the periods in which those temporary differences will become deductible. We identified the realizability of the Company’s U.S. deferred tax assets as a critical audit matter.

The principal consideration for our determination that the realizability of U.S. deferred tax assets is a critical audit matter is the significant judgment regarding the weighting of available positive and negative evidence to determine that the existing valuation allowance on U.S. deferred tax assets remains appropriate. Our audit procedures related to the realizability of the U.S. deferred tax assets included the following, among others. With the involvement of tax professionals, including consultation with national office resources, we assessed the appropriateness of management’s evaluation of available positive and negative evidence supporting the valuation allowance position.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2016.

Boston, Massachusetts

February 22, 2024

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INSULET CORPORATION

CONSOLIDATED BALANCE SHEETS

As of December 31,

(in millions, except share and per share data) 2023 2022

ASSETS

Current Assets

Cash and cash equivalents $ 704.2 $ 674.7

Accounts receivable trade, net 240.2 140.9

Accounts receivable trade, net — related party 119.5 64.7

Prepaid expenses and other current assets 116.4 86.9

Property, plant and equipment, net 664.9 599.9

Other intangible assets, net 98.7 75.5

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accrued expenses and other current liabilities 373.7 301.0

Accrued expenses and other current liabilities — related party 8.9 5.4

Current portion of long-term debt 49.4 27.5

Commitments and contingencies (Note 19)

Stockholders’ Equity

Accumulated other comprehensive income 8.0 20.0

Total liabilities and stockholders’ equity $ 2,588.2 $ 2,251.1

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

(in millions, except share and per share data) 2023 2022 2021

Selling, general and administrative expenses 734.9 587.8 466.0

Loss on extinguishment of debt — — (42.4)

Other income (expense), net 2.2 (1.1) (1.9)

Income tax expense (8.3) (5.2) (3.7)

Net income per share:

Weighted-average number of common shares outstanding (in thousands):

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31,

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustment 2.5 (10.3) (11.9)

Unrealized (loss) gain on cash flow hedges (14.2) 32.5 4.5

Unrealized loss on securities (0.3) — (0.3)

Total other comprehensive (loss) income, net of tax (12.0) 22.2 (7.7)

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in millions) Shares (in thousands) Amount

Exercise of options to purchase common stock 364 — 15.4 — — 15.4

Issuance of shares for employee stock purchase plan 36 — 8.1 — — 8.1

Stock-based compensation expense — — 34.4 — — 34.4

Issuance of shares for debt extinguishment 2,586 — 722.4 — — 722.4

Other comprehensive loss — — — — (7.7) (7.7)

Exercise of options to purchase common stock 147 — 6.9 — — 6.9

Issuance of shares for employee stock purchase plan 53 — 9.4 — — 9.4

Stock-based compensation expense — — 40.9 — — 40.9

Net income — — — 4.6 — 4.6

Other comprehensive income — — — — 22.2 22.2

Exercise of options to purchase common stock 249 — 16.3 — — 16.3

Issuance of shares for employee stock purchase plan 55 — 10.6 — — 10.6

Stock-based compensation expense — — 48.3 — — 48.3

Other comprehensive loss — — — — (12.0) (12.0)

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

Cash flows from operating activities

Stock-based compensation expense 48.3 40.9 34.4

Non-cash interest expense 6.7 5.8 40.2

Loss on extinguishment of convertible debt — — 42.4

Provision for credit losses 2.3 4.2 3.1

Changes in operating assets and liabilities:

Accounts receivable — related party (54.8) (38.9) (25.8)

Prepaid expenses and other assets (42.1) (36.8) (46.7)

Accrued expenses and other liabilities 73.8 133.9 22.7

Accrued expenses and other liabilities — related party (3.5) 3.7 1.7

Net cash provided by (used in) operating activities 145.7 119.0 (68.1)

Cash flows from investing activities

Investments in developed software (8.5) (12.9) (10.8)

Acquisition of other intangible assets (25.1) (21.5) —

Acquisition of a business (3.0) (26.0) —

Cash paid for investments (7.2) (7.8) —

Receipts from the maturity or sale of marketable securities — — 40.0

Net cash used in investing activities (119.4) (191.1) (82.7)

Cash flows from financing activities

Repayment of convertible debt — — (460.9)

Proceeds from issuance of term loan, net of issuance costs — — 489.5

Repayment of term loan (5.0) (5.0) (2.5)

Proceeds from equipment financings, net — — 43.1

Repayment of equipment financings (19.8) (17.4) (17.8)

Repayment of mortgage (2.2) (2.1) (2.0)

Payment of debt issuance costs (0.3) — (4.0)

Prepayments of financing lease obligation — (15.3) —

Proceeds from exercise of stock options 16.3 6.9 15.4

Net cash (used in) provided by financing activities (13.6) (40.3) 40.7

Effect of exchange rate changes on cash 1.8 (4.3) (5.5)

Cash, cash equivalents, and restricted cash, beginning of year 689.7 806.4 922.0

Supplemental cash flow information (Note 25)

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of the Business

Insulet Corporation (the “Company”) is primarily engaged in the development, manufacture, and sale of its proprietary continuous insulin delivery system for people with insulin-dependent diabetes. Currently, the Omnipod platform’s revenue generating products include: the Omnipod Insulin Management System (“Classic Omnipod”), its next generation Omnipod DASH® Insulin Management System (“Omnipod DASH”), and its newest generation Omnipod® 5 Automated Insulin Delivery System (“Omnipod 5”). Each product features a small, lightweight, self-adhesive disposable tubeless Omnipod device (“Pod”) that the user fills with insulin and wears directly on the body for up to three days at a time, which delivers personalized doses of insulin, Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like Personal Diabetes Manager (“PDM”) with a color touch screen user interface. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system, that integrates with a continuous glucose monitor (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. The CGM is sold separately by a third party.

The Company generates most of its revenue from sales of its Omnipod products, which are sold in the U.S., Europe, Canada, the Middle East, and Australia either directly to end-users or indirectly through intermediaries. Intermediaries include independent distributors who resell Omnipod products to end-users and wholesalers who sell the Company’s product to end-users through the pharmacy channel in the United States. Substantially all of the Company’s Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements reflect the consolidated operations of Insulet Corporation and its subsidiaries. The 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 amount 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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Foreign Currency Translation

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using exchange rates as of the balance sheet date, while income and expenses of foreign subsidiaries are translated using the average exchange rates in effect for the related month. The net effect of these translation adjustments is reported in accumulated other comprehensive income (loss) within stockholders’ equity on the consolidated balance sheet. Net realized and unrealized gains (losses) from foreign currency transactions are included in other income (expense), net in the consolidated statement of operations and were $(0.4) million, $(1.3) million and $(2.0) million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents may include money market mutual funds, commercial paper, and U.S. government and agency bonds, that are carried at cost. Restricted cash required to be set aside in connection with equipment financings or that serves as collateral for outstanding letters of credit and bank guarantees is included in other assets and cash and cash equivalents on the consolidated balance sheet.

Certain of the Company’s subsidiaries participate in a multi-currency, notional cash pooling arrangement with a third-party bank provider to manage global liquidity requirements. Under this arrangement, cash deposited by participating subsidiaries may be in positive or negative cash positions to the extent the overall balance in the cash pool is at least zero. The net cash balance of the notional cash pooling arrangement is included within cash and cash equivalents in the consolidated balance sheets and was insignificant at both December 31, 2023 and 2022.

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Investments

The Company has investments in equity securities of privately held companies, in which the Company’s interest is less than 20%, the Company does not exercise significant influence over the investee, and the investment does not have a readily determinable fair value. These investments are carried at cost less impairment, if any. If an observable price change in orderly transactions for the identical or similar investment in the same issuer is identified, the investment is measured at its fair value as of the date that the observable transaction occurred with the adjustments reflected in other income (expense), net in the Company’s consolidated statements of operations.

The Company also has investments in debt securities of privately held companies, which are either classified as available-for-sale securities or for which the Company has elected the fair value option. The available-for-sale securities are recorded at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity on the consolidated balance sheet. The other investment is a debt security that contains embedded derivatives. Unrealized gains and losses for this investment are recorded as a component of other income (loss), net in the consolidated statement of operations. All investments in debt securities are recorded within other assets on the consolidated balance sheet.

The Company may also invest in marketable securities, including term deposits, commercial paper, U.S. government and agency bonds, and corporate bonds, which are classified as available-for-sale and carried at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity on the consolidated balance sheet. Investments with a stated maturity date of more than one year from the balance sheet date and that are not expected to be used in current operations are classified as long-term investments within other assets on the consolidated balance sheet. The Company reviews investments for other-than-temporary impairment when the fair value of an investment is less than its amortized cost. If an available-for-sale security is other than temporarily impaired, the loss is included in other income (expense), net in the consolidated statement of operations.

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 uncollectible.

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 and the financial condition of the distributors.

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.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined under the first-in, first-out method. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments, or other economic factors in order to state inventories at net realizable value. Factors influencing these adjustments include inventories on hand compared to estimated future usage and sales.

Contract Acquisition Costs

The Company incurs commission costs to obtain a contract related to new customer starts. These costs are capitalized as contract assets in other assets on the consolidated balance sheet, net of the short-term portion included in prepaid and other current assets. Costs to obtain a contract are amortized to selling, general and administrative expense on a straight-line basis over the expected period of benefit, which considers future product upgrades. These costs are periodically reviewed for impairment.

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Derivative Instruments

The Company is exposed to certain risks relating to its business operations. Risks that relate to interest rate exposure are managed by using interest rate swaps. The Company recognizes derivative instruments as either assets or liabilities at fair value on the consolidated balance sheet. Changes in a derivative financial instrument’s fair value are recognized in earnings unless specific hedge criteria are met, in which case changes in fair value are recognized as adjustments to other comprehensive income. The Company has designated its interest rate swap contracts as cash flow hedges.

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.

Judgement is involved in estimating inputs, such as discount rates, used in Level 3 fair value measurements. Changes to these inputs can have a significant effect on fair value measurements and amounts that could be realized.

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.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Major improvements are capitalized, while routine repairs and maintenance are expensed as incurred. Depreciation for property, plant and equipment, other than land and construction in progress, is based upon the following estimated useful lives using the straight-line method:

Building and building improvements 20 to 39 years

Leasehold improvements Lesser of lease term or useful life of asset

Machinery and equipment 2 to 15 years

Furniture and fixtures 3 to 5 years

The Company assesses the recoverability of assets whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. The Company recognizes an impairment loss if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows. The impairment loss is measured as the difference between the carrying amount and the fair value of the asset.

Business Combinations

The Company recognizes the assets and liabilities assumed in business combinations based on their estimated fair values at the date of acquisition. The Company allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets. The Company assesses the fair value of assets, including intangible assets, using a variety of methods and each asset is measured at fair value from the perspective of a market participant. Assets recorded from the perspective of a market participant that are determined to not have economic use for the Company are expensed immediately. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated with a business combination are expensed as incurred.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the amounts assigned to assets and liabilities assumed in a business combination. The Company performs an assessment of its goodwill for impairment annually on October 1 or whenever events or changes in circumstances indicate there might be impairment. Goodwill is evaluated for impairment at the reporting unit level.

The Company may assess its goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts, and circumstances that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to determine if there is any

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impairment. Alternatively, the Company may elect to initially perform a quantitative analysis instead of starting with a qualitative analysis. The Company would record an impairment loss to the extent that the carrying value of the reporting unit’s goodwill exceeds its fair value.

Intangible assets acquired in a business combination are recorded at fair value, while intangible assets purchased or software developed for internal-use are recorded at cost and are stated at cost less accumulated amortization. Intangible assets with finite useful lives are amortized based on the pattern in which the economic benefits of the assets are estimated to be consumed over the following estimated useful lives of the assets:

Customer relationships 14 years

Internal-use software 3 to 5 years

Developed technology 13 to 15 years

Patents 8 to 15 years

Amortization expense is included in selling, general and administrative expenses in the consolidated statement of operations. The Company reviews intangible assets for impairment by comparing the fair value of the assets, estimated using an income approach, with their carrying value. If the carrying value exceeds the fair value of the intangible asset, the Company recognizes an impairment equal to the difference between the carrying value of the asset and the present value of future cash flows. The Company assesses the remaining useful life and the recoverability of intangible assets whenever events or circumstances indicate that the carrying value of an asset may not be recoverable using undiscounted cash flows.

Cloud Computing Arrangements

Cloud computing arrangements includes services used to support certain internal corporate functions as well as technology platforms that support commercial initiatives. The Company capitalizes costs incurred to implement cloud computing arrangements that are service contracts within other current and non-current assets and amortizes such costs over the expected term of the hosting arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses. The Company assesses the recoverability of capitalized implementation costs in accordance with the policy disclosed under Property, Plant and Equipment.

Leases

The Company determines if an arrangement includes a lease at inception. Lease agreements generally have lease and non-lease components, which are accounted for separately. At lease commencement, the Company recognizes lease liabilities equal to the present value of the future lease payments and lease assets representing the right to use the underlying asset throughout the lease term. Certain leases may contain variable lease payments, including periodic payments that can be avoided by the Company. Variable payments that do not depend on an index or rate are excluded from the right-of-use asset and lease liability and are recognized as expenses in the period in which the obligation for those payments is incurred. Certain of the Company’s leases contain options to extend and/or terminate the lease, and/or to purchase the underlying asset. The lease term used to calculate the right-of-use asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company’s leases do not provide an implicit rate; accordingly, the Company uses an incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The Company’s incremental borrowing rate reflects a secured rate that considers the term of the lease, the nature of the underlying asset and the economic environment. The Company excludes leases with an expected term of one year or less from recognition on the consolidated balance sheet. Right-of-use assets are calculated as the initial measurement of the lease liability plus lease payments made prior to lease commencement and initial direct costs incurred, less lease incentives received.

Lease expense is recognized on a straight-line basis over the lease term. For finance leases, the right-of-use asset is amortized to amortization expense and interest expense is recorded in connection with the lease liability.

Contingencies

The Company records a liability on the consolidated balance sheet for loss contingencies when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. Legal costs associated with loss contingencies are expensed as incurred.

Product Warranty

The Company provides afour-year warranty on its PDMs and Controllers sold in the United States and Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications. The

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Company estimates its warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims. Costs to service the claims reflect the current product cost, reclaim costs, shipping and handling costs and direct and incremental distribution and customer service support costs. Since the Company continues to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves. Warranty expense is recorded in cost of revenue in the consolidated statements of operations.

Revenue Recognition

Revenue is recognized when a customer obtains control of the promised products. The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for these products. To achieve this core principle, the Company applies the following five steps:

•Identify Contracts with Customers. The Company’s contracts with its direct customers generally consist of a physician order form, a customer information form and, if applicable, third-party insurance (payor) approval. Contracts with the Company’s intermediaries are generally in the form of master service agreements against which firm purchase orders are issued. At the outset of the contract, the Company assesses the customer’s ability and intention to pay, which is based on a variety of factors including historical payment experience or, in the case of a new intermediary, credit references and other available financial information pertaining to the customer and, in the case of a new direct customer, an investigation of insurance eligibility.

•Identify Performance Obligations. The performance obligations in contracts for the delivery of Omnipod products to new end-users, either directly to end-users or through intermediaries, primarily consist of the PDM/Controller, the initial and subsequent quantity of Pods ordered, and product training. In the Company’s judgment, these performance obligations are capable of being distinct in the context of the contract in that the customer can benefit from each item in conjunction with other readily available resources and the transfer of the PDM/Controller and the Pods is separately identifiable in the contract with the customer.

•Determine Transaction Price. The price charged for the PDM/Controller and Pods is dependent on the Company’s pricing as established with third-party payors and intermediaries. The Company provides a right of return for sales of its Omnipod products to new end-users and certain of our distributors and wholesalers. The Company also provides for certain rebates and discounts for sales of its product through intermediaries. These rights of return, discounts, and rebates represent variable consideration and reduce the transaction price at the outset of the contract based on the Company’s estimates, which are primarily based on the expected value method using historical and other data (such as product return trends or forecasted sale volumes) related to actual product returns, discounts, and rebates paid in each market in which Omnipod products are sold. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur; otherwise, the Company reduces the variable consideration. The variable consideration in the Company’s contracts is not typically constrained and the Company’s contracts do not contain significant financing components.

•Allocate Transaction Price to Performance Obligations. The Company allocates the transaction price to each performance obligation based on its relative stand-alone selling price, which is determined based on the price at which the Company typically sells the deliverable or, if the performance obligation is not typically sold separately, the stand-alone selling price is estimated based on cost plus a reasonable profit margin or the price that a third party would charge for a similar product or service.

•Recognize Revenue as Performance Obligations are Satisfied. The Company transfers Omnipod products at a point in time, which is determined based on when the customer gains control of the product. Generally, intermediaries in the United States, obtain control upon shipment based on the contractual terms, including right to payment and transfer of title and risk of ownership. For sales directly to end-users and international intermediaries, control is generally transferred at the time of delivery based on customary business practices related to risk of ownership, including transfer of title. Revenue from product training is recognized in the period it is provided. The Company records deferred revenue related to product training as there is generally a lag between when the customer is billed and when the end-user receives product training.

The Company’s Drug Delivery product line includes sales of a modified version of the Pod to pharmaceutical and biotechnology companies who use the Company’s technology as a delivery method for their drugs. For the majority of this product line, revenue is recognized, with an associated unbilled receivable, as the product is produced pursuant to the customer’s firm purchase commitments. The Company has an enforceable right to payment for performance completed to date and the inventory has no alternative use to the Company. Judgment is required in the assessment of progress toward completion of in-process inventory. The Company recognizes revenue over time using a blend of costs incurred to date relative to total estimated costs at completion and time incurred to date relative to total production time to measure progress toward the satisfaction of its performance obligations. The Company believes that both incurred cost and elapsed time reflect the value generated, which best depicts the transfer of control to the customer. Contract costs include third-party costs as well as an allocation of manufacturing overhead.

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Research and Software Development Costs

Internal research and development costs are expensed as incurred. Research and development expenses include salary and benefits, allocated overhead and occupancy costs, clinical trial and related clinical manufacturing costs, contract services, and other costs.

Costs incurred in the research, design, and development of software embedded in products to be sold to customers are charged to expense until technological feasibility of the ultimate product to be sold is established. The Company’s policy is that technological feasibility is achieved when a working model, with the key features and functions of the product, is available for customer testing. Software development costs incurred after the establishment of technological feasibility and until the product is available for general release are capitalized, provided recoverability is reasonably assured. Capitalized software development costs are amortized over their estimated useful life and recorded within cost of revenues.

Shipping and Handling Costs

The Company does not typically charge its customers for shipping and handling costs associated with shipping its product to its customers unless non-standard shipping and handling services are requested. These shipping and handling costs are included in selling, general and administrative expenses and were $12.4 million, $12.8 million, and $10.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Advertising Costs

The Company expenses advertising costs as they are incurred. Advertising expenses were $63.1 million, $41.2 million, and $44.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Stock-Based Compensation Expense

The Company measures stock-based compensation on the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect in the years in which the differences are expected to reverse. The Company reviews its deferred tax assets for recoverability by considering all available positive and negative evidence, including historical profitability, projected future taxable income, and the expected timing of the reversals of existing temporary differences and tax planning strategies. A valuation allowance is provided to reduce the deferred tax assets if, based on the available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. The effect of a change in enacted tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Interest and penalties are classified as a component of income tax expense. The Company has not reclassified income tax effects within accumulated other comprehensive income (loss) to retained earnings due to its full valuation allowance.

Concentration Risk

Credit Risk—Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and accounts receivable. The Company maintains most of its cash and investments with a limited number of financial institutions that have a high investment grade credit rating, which exceed Federal Deposit Insurance Corporation limits. See Notes 4and 7 for customer concentration.

Supply Risk—The Company uses different types of semiconductor chips, which are sourced from external suppliers, in the manufacturing of its products. While the Company has multiple suppliers of semiconductor chips, each type is typically sourced from a single supplier. Supply chain disruptions, supplier shortages, logistic delays, or quality problems could result in manufacturing delays, increased costs, or a possible loss of sales, which could adversely affect operating results.

Recently Adopted Accounting Standards

Convertible Debt—Effective January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2020-06, Debt – Debt With Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity using the modified retrospective method for convertible debt instruments outstanding as of the date of adoption. Under ASU 2020-06, a convertible debt instrument is generally reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the effective interest rate of convertible debt instruments is closer to the coupon interest rate

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under this guidance. The cumulative effect of adopting ASU 2020-06 resulted in a $207.7 million decrease to the opening balance of additional paid-in-capital upon adoption resulting from the derecognition of the embedded conversion feature and debt issuance costs bifurcated to equity, a $60.6 million decrease to the opening balance of accumulated deficit representing the cumulative interest expense recognized related to the amortization of the bifurcated conversion option and debt issuance costs, and a $147.1 million increase in long-term debt resulting from the derecognition of the discount associated with the embedded conversion feature, offset by the remaining debt issuance costs reclassified out of equity. In addition, the Company wrote-off the related deferred tax liabilities with a corresponding adjustment to the valuation allowance, resulting in no net impact to the cumulative adjustment recorded to accumulated deficit. Adoption of this standard had no impact on the Company’s diluted earnings per share as the Company historically calculated earnings per share using the if-converted method.

Reference Rate Reform—ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Reporting and ASU 2021-01, Reference Rate Reform (Topic 848) – Scope allow companies to elect optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform (e.g., discontinuation of the London Interbank Offered Rate (“LIBOR”)) if certain criteria are met. During the fourth quarter of 2022, the Company elected to apply optional expedients for contract modifications to all eligible debt instruments and hedging relationships affected by the transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”). Accordingly, the Company did not have to assess whether the contract modification should be accounted for as a debt extinguishment. Additionally, the Company was not required to dedesignate hedging relationships when the contractual terms changed. The adoption of these standards had no impact on our consolidated financial statements.

Note3. Segment and Geographic Data

The Company operates under one reportable segment. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the chief operating decision-maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance of the segment. The Company has concluded that its Chief Executive Officer (“CEO”) is the CODM as the CEO is the ultimate decision maker for key operating decisions, determining the allocation of resources and assessing the financial performance of the Company. These decisions, allocations, and assessments are performed by the CODM using consolidated financial information, as the Company’s current product offering primarily consists of the Omnipod platform and drug delivery device based on the Omnipod platform.

Geographic information about revenue, based on customer location, is as follows:

Years Ended December 31,

Geographic information about long-lived assets, net, excluding goodwill and other intangible assets is as follows:

As of December 31,

Total long-lived assets, net $ 664.9 $ 599.9

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Note 4. Revenue and Contract Acquisition Costs

The following table summarizes the Company’s disaggregated revenue:

Years Ended December 31,

The percentages of total revenue for customers that represent 10% or more of total revenue was as follows:

Years Ended December 31,

Distributor A 28% 19% *

Distributor B 24% 16% *

* Represents less than 10% of revenue for the period.

Deferred revenue related to unsatisfied performance obligations was included in the following consolidated balance sheet accounts in the amounts shown:

As of December 31,

Accrued expenses and other current liabilities $ 15.4 $ 16.1

Other liabilities 1.9 1.6

Total deferred revenue $ 17.3 $ 17.7

Revenue recognized from amounts included in deferred revenue at the beginning of each respective period was as follows:

As of December 31,

Deferred revenue recognized $ 16.0 $ 2.1 $ 4.4

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:

As of December 31,

Prepaid expenses and other current assets $ 16.6 $ 15.2

Total capitalized contract acquisition costs, net $ 48.6 $ 46.5

The Company recognized $16.3 million, $14.6 million, and $12.3 million of amortization of capitalized contract acquisition costs for the years ended December 31, 2023, 2022, and 2021, respectively.

Note 5. Related Party Transactions

In February 2021, the Company entered into a distribution agreement, the terms of which are consistent with those prevailing at arm’s length. The spouse of one of the members of the Company’s Board of Directors is an executive officer of the distributor. The Company recorded $473.7 million, $249.9 million and $58.2 million of net revenues from the distributor for the years ended December 31, 2023, 2022, and 2021, respectively.

At each period end, related party transactions recorded on the consolidated balance sheets were as follows:

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As of December 31,

Accounts receivable, net $ 119.5 $ 64.7

Distribution fees payable(1) $ 6.1 $ 3.4

Deferred revenue(1) $ 2.8 $ 2.0

(1) Balances are included in accrued expenses and other current liabilities.

Note 6. Cash and Cash Equivalents

The following table provides a summary of cash and cash equivalents as of December 31, 2023 and 2022:

As of December 31,

Restricted cash — 0.5

Total cash and cash equivalents 704.2 674.7

Restricted cash included in other assets — 15.0

Restricted cash included in other assets on the consolidated balance sheet as of December 31, 2022 was held as a compensating balance against long-term borrowings.

Note 7. Accounts Receivable

At the end of each period, accounts receivable were comprised of the following:

As of December 31,

Accounts receivable trade, net $ 234.5 $ 128.6

Unbilled receivable 5.7 12.3

The percentages of total net accounts receivable trade for customers that represent 10% or more of total net accounts receivable trade were as follows:

As of December 31,

Distributor A 35% 34%

Distributor B 25% 23%

Distributor C 18% 11%

The following table presents the activity in the allowance for credit losses, which is comprised primarily of the Company’s direct consumer receivable portfolio. The allowance for credit losses of other portfolios is insignificant.

Year Ended December 31,

Credit losses at beginning of year $ 2.5 $ 2.7 $ 2.9

Provision for expected credit losses 2.3 4.2 3.1

Write-offs charged against allowance (2.6) (4.9) (3.8)

Recoveries of amounts previously reserved 0.3 0.5 0.5

Credit losses at end of year $ 2.5 $ 2.5 $ 2.7

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Note 8. Inventories

At the end of each period, inventories were comprised of the following:

As of December 31,

Amounts charged to the consolidated statements of operations for excess and obsolete inventory for the years ended December 31, 2023, 2022, and 2021 were $3.7 million, $8.4 million, and $2.8 million, respectively.

Note 9. Cloud Computing Costs

Capitalized costs to implement cloud computing arrangements at cost and accumulated amortization were as follows:

As of December 31,

Short-term portion $ 26.4 $ 18.0

Total capitalized implementation costs 143.3 105.1

Less: accumulated amortization (36.6) (17.1)

Capitalized implementation costs, net $ 106.7 $ 88.0

Amortization expense is recognized on a straight-line basis over the expected term of the hosting arrangements, which range from three to ten years. Amortization expense was $20.3 million, $12.7 million, and $2.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Note 10. Property, Plant and Equipment, Net

Property, plant and equipment at cost and accumulated depreciation were as follows:

As of December 31,

Building and building improvements(2) 205.3 163.9

Furniture and fixtures 18.1 17.2

Leasehold improvements 16.0 11.7

Property, plant and equipment, gross 958.1 834.6

Less: accumulated depreciation(2) (293.2) (234.7)

Property, plant and equipment, net $ 664.9 $ 599.9

(1) Includes $6.5 million of land at December 31, 2023 related to the finance lease discussed in Note 15.

(2) Includes $31.7 million of building and building improvements and $0.4 million of accumulated depreciation at December 31, 2023 related to the finance lease discussed in Note 15.

Capitalized interest expense was $1.6 million, $1.3 million, and $5.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. Depreciation expense related to property and equipment was $62.6 million, $56.0 million, and $50.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. Construction in process primarily consists of manufacturing equipment for our new manufacturing facility being constructed in Malaysia and equipment and tooling for our existing manufacturing lines, most of which is expected to be placed into service during 2024.

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Note 11. Business Combination

On January 3, 2022, the Company acquired substantially all of the assets related to the manufacture and production of shape-memory alloy wire assemblies that are used in the production of Pods from Dynalloy, Inc., a maker of dynamic alloys. The aggregate purchase price was $29.0 million, of which $26.0 million was paid in cash upon closing, and the remaining $3.0 million was paid in January 2023. Transaction costs were expensed as incurred and were not material.

The following table summarizes the fair value allocation of the assets acquired at the date of acquisition:

(in millions)

Inventories $ 0.5

Property, plant and equipment 0.9

Other assets 0.2

Goodwill (tax deductible) 12.0

Developed technology (15 year useful life) 15.4

Total assets acquired $ 29.0

The primary factor that contributed to an acquisition price in excess of the fair value of assets acquired and the establishment of goodwill was the expected cost savings resulting from the integration of a supplier.

Note 12. Goodwill and Other Intangible Assets, Net

Goodwill

The change in the carrying amount of goodwill for the period is as follows:

Year Ended December 31,

Goodwill at beginning of the year $ 51.7 $ 39.8

Acquisition (Note 11) — 12.0

Foreign currency translation — (0.1)

Goodwill at end of the year $ 51.7 $ 51.7

Intangible Assets, Net

The gross carrying amount, accumulated amortization and net book value of intangible assets at the end of each period were as follows:

As of December 31,

(1) Includes intangible assets acquired in December 2022. See Note 19 for additional information.

Amortization expense for intangible assets was $10.2 million, $7.2 million, and $6.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

In February 2023, the Company paid Bigfoot Biomedical, Inc. $25.1 million, including transaction costs, to acquire patent assets related to pump-based automated insulin delivery technologies. The acquired patent assets have a useful life of 11 years.

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Amortization expense associated with the intangible assets included on the Company’s consolidated balance sheet as of December 31, 2023 is expected to be as follows:

Years Ending December 31, (in millions)

Note 13. Investments

Equity Securities

As of December 31, 2023 and 2022, the total carrying value of the Company’s investments in equity securities without readily determinable fair values was $9.7 million and $8.7 million, respectively. During 2023, the unrealized gain recorded due to changes in the fair value of equity investments was insignificant. There were no adjustments as of December 31, 2022.

Debt Securities

In 2023, the Company made a strategic investment in debt securities of a privately held entity in the amount of $5.0 million. The debt securities mature in December 2024, unless converted earlier. The amortized cost basis and fair value of the investment are $5.0 million and $4.7 million, respectively, as of December 31, 2023. The unrealized loss recorded due to changes in the fair value of the investment during 2023 was insignificant.

Other

In 2023, the Company made a strategic investment in a privately held entity in the amount of $2.0 million. The investment is a debt security with embedded derivatives and is accounted for by applying the fair value option, as this approach best reflects the underlying economics of the transaction. The fair value of the investment was calculated using a combination of the market approach and income approach methodologies. During 2023, a $1.8 million unrealized gain on the investment was recorded in other income (loss), net in the consolidated statement of operations. The fair value of the investment as of December 31, 2023 was $3.8 million and is reported within other assets on the consolidated balance sheet. The amount of interest earned on the investment in 2023 was insignificant.

Note 14. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities were as follows:

As of December 31,

Employee compensation and related costs 122.0 95.9

Professional and consulting services 34.1 27.5

Warranty liability - current portion 4.8 57.3

Accrued expenses and other current liabilities $ 373.7 $ 301.0

Product Warranty Costs

Reconciliations of the changes in the Company’s product warranty liability were as follows:

Years Ended December 31,

Product warranty liability at beginning of year $ 62.1 $ 6.8

Change in estimate (11.5) (14.0)

Warranty fulfillment (58.9) (17.7)

Product warranty liability at end of year $ 10.3 $ 62.1

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During the fourth quarter of 2022, the Company issued two voluntary medical device correction notices (“MDCs”), one for its Omnipod DASH PDM relating to its battery and the other for its Omnipod 5 Controller relating to its charging port and cable. During the year ended December 31, 2022, the Company initially recorded an estimated liability of $68.9 million related to these MDCs, which was subsequent revised by $11.0 million, resulting in a net charge of $57.9 million for the year ended December 31, 2022. The $11.0 million change in estimate primarily resulted from significantly fewer customers requesting a replacement Omnipod DASH PDM prior to the Company’s updated PDM being available. During the year ended December 31, 2023, the Company revised the estimated liability for these MDCs by an additional $11.5 million. This change in estimate primarily resulted from lower distribution costs. The Company had a liability of $0.7 million and $54.6 million related to the MDCs included in its product warranty liability at December 31, 2023, and 2022, respectively.

Note 15. Leases

As of December 31, 2023, the Company leased certain automobiles and facilities for offices, laboratories, manufacturing, and warehousing, all of which were classified as operating leases. Certain of the Company’s operating leases include escalating rental payments, some include the option to extend for up to 10 years, and some include options to terminate the leases at certain times within the lease term. The Company also leases land and a manufacturing building in Malaysia, which are classified as finance leases. The Company has the option to purchase the property at any point after the completion of construction and is contractually obligated to purchase the property nine months after completion, which occurred in December 2023. Because the Company is reasonably certain to purchase the property, the lease term of each finance lease equals the economic life of the underlying asset. As of December 31, 2023, the Company had not exercised the purchase option.

As of December 31, 2023, lease assets and lease liabilities were included in the following consolidated balance sheet accounts in the amounts shown:

Years Ended December 31,

Operating leases

Operating lease asset:

Operating lease liabilities:

Accrued expenses and other current liabilities $ 3.5 $ 3.6

Total operating lease liabilities $ 33.0 $ 31.0

Finance leases

Finance lease assets:

Property, plant and equipment, net $ 37.8 $ —

Finance lease liabilities:

Current portion of long-term debt and finance leases $ 22.9 $ —

The Company’s operating and financing lease cost was as follows:

Year Ended December 31,

Operating lease cost $ 8.8 $ 8.8 $ 6.0

Finance lease cost:

Amortization of leased assets 0.4 — —

Interest on lease liabilities 0.6 — —

Total finance lease cost 1.0 — —

Total operating and financing lease cost $ 9.8 $ 8.8 $ 6.0

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Maturities of lease liabilities as of December 31, 2023 are as follows:

(in millions)

Years Ending December 31, Operating Leases Finance Lease(1)

Thereafter 33.8 —

Total future minimum lease payments 52.8 23.2

Less: imputed interest (19.8) (0.3)

Present value of future minimum lease payments $ 33.0 $ 22.9

(1) Excludes optional variable lease payments.

As of December 31, 2023, the weighted average remaining lease term and weighted-average discount rate for leases were as follows:

Operating Leases Finance Leases

Weighted average remaining lease term 12.4 years 9 months

Weighted-average discount rate used to determine the lease liability 7.1 % 6.0 %

Note 16. Debt

The components of debt consisted of the following:

As of December 31,

Equipment financing due May 2024 $ 2.7 $ 9.5

Equipment financing 12.7 —