Good day, ladies and gentlemen, and welcome to the Q2 2017 Insulet Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. Deborah Gordon, Vice President of Investor Relations. Ma'am, you may begin.

Thank you, Bruce. Good afternoon and thank you for joining us for our second quarter 2017 earnings call. Joining me today are Patrick Sullivan, Chairman and Chief Executive Officer; Shacey Petrovic, President and Chief Operating Officer; and Michael Levitz, Senior Vice President and Chief Financial Officer. The replay of this call will be archived on our website. Our press release discussing our second quarter 2017 results and third quarter and full year 2017 guidance is also available in the IR section of our website. Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and involves known and unknown risks and uncertainties that may cause actual results to be materially different from any future results implied by such statements. Such factors include those referenced in our Safe Harbor statement, in our second quarter earnings release and in the company's filings with the SEC. With that, I'll turn the call over to Pat.

Thank you, Deb. Good afternoon, everyone, and thank you for joining us on the call today. I'll begin with comments on the exciting news we released to the market on July 20, to directly distribute the Omnipod in Europe. And then, I'll provide a brief review of our second quarter performance and share our recent business highlights. Mike will then provide more detail on our second quarter financial results, our guidance for Q3 and full year 2017. Shacey will follow up on our commercial and R&D progress and then we'll open the call for questions. July 20 was a day of significant transformation in Insulet's history. On that day, we announced our decision to directly sell the Omnipod System in Europe. This move will significantly accelerate our revenue growth and further improve our gross margin profile, when this transition is complete. And when combined with other steps we're taking, our gross margin will expand from 50% in 2015 to nearly 70% in 2021, a remarkable 2,000 basis point improvement. We are absolutely positively thrilled to go direct in Europe. This move will allow us to be close to our customers, have control over our existing and future markets, significantly improve our gross margins, and increase value for our shareholders. To be clear, this was a well-considered and extensively evaluated decision. Since the day I arrived at Insulet nearly three years ago, we have analyzed and exhausted a number of opportunities to best serve our European customers and capitalize on the significant international opportunities. Our exclusive distributor has done a fine job establishing a large, growing and incredibly loyal Omnipod customer base in Europe. Our decision came down to control, execution, margin expansion, and shareholder value creation. There is absolutely no question that this is the right decision and the right…

Thank you, Pat. I will review our second quarter results and then discuss our third quarter and full year 2017 guidance. I will also give some color on the expected impact of our recently announced assumption of direct distribution in Europe in mid-2018. As I review our results, unless otherwise stated, all commentary regarding changes will be on a year-over-year basis. We are very pleased to report second quarter revenue growth of 26%, with revenue of $109.8 million compared to $87.3 million. All three of our product lines contributed meaningfully to this growth. We exceeded the midpoint of our stated guidance by $4 million with half of the beat coming from U.S. Omnipod and the remainder split between international Omnipod and Drug Delivery due to strong demand across our business. Our gross margin increased by over 100 basis points to 58.9%, primarily from improvements we have made over the last year to our manufacturing and supply chain operations, as well as improvements to product quality, offset in part by unfavorable mix due to higher international distributor sales. Our operating expenses increased to $68 million compared to $51.7 million and were consistent year-over-year as a percentage of revenues. The increase in spending reflects head count that we've added over the last year to support the growth in our business, including increased investment in development and clinical work on our exciting innovation projects, as well as the expansion of our commercial and operational infrastructure, consistent with our stated plans and objectives. We ended the quarter with over $258 million in cash and investments compared to approximately $300 million at the end of last year. The decrease is a result of our capital expenditures, primarily associated with investments in our U.S. manufacturing project, which continues on plan. Our cash and investments also reflect…

Thanks, Mike. We have completed the first half of 2017 with strong results and we're headed into the second half with incredible momentum. Second quarter results were once again terrific. Our commercial strategies continue to drive robust revenue growth and a sizable increase in our installed base. We also made substantial progress on innovation and operational initiatives, particularly with our Omnipod Dash and Horizon programs. As a result of the tremendous growth we're experiencing internationally, we are increasing our full year 2017 expectation to approximately 25% year-over-year growth in our global Omnipod installed base. We're reaffirming the expected growth of 15% in our U.S. installed base. And we're raising our estimate of the international installed base growth to over 40% from our prior assumption of 30%. As a reminder, because of Omnipod's recurring revenue model, installed base growth is the best predictor of revenue growth. In Q2, our U.S. installed base grew approximately 15% year-over-year, as we expected, and our international installed base grew more than 70%, exceeding our expectation. Combined, this represents year-over-year growth in our global installed base of approximately 35% as of the end of the second quarter, which drove our strong company revenue growth. Our U.S. revenue growth was fueled by the investments we have made to increase field sales footprint, raise product awareness, and broaden market access. These efforts are driving improved account penetration and are attracting more potential new users to Omnipod. Our pipeline is the strongest it has been in company history. We're clearly increasing awareness among our targeted segment, multiple daily injection users. Direct-to-consumer digital advertising is helping to educate MDI users on how Omnipod can give them better control, freedom and quality of life compared to other insulin delivery methods. And our field team is driving increased advocacy and utilization among…

Shacey, thank you very much. Operator, let's open the call up for questions.

And our first question comes from Margaret Kaczor from William Blair. Your line is now open. Margaret M. Kaczor - William Blair & Co. LLC: Good afternoon, everyone. Thanks for taking the questions. I appreciate the extra color at the front-end here. That was helpful. In terms of as we look at maybe the next couple years for the European markets, can you give us any more detail in terms of France, how important is France towards growth and maybe as a percent of the installed base?

Sure. Margaret, this is Shacey. France is approximately a third of our installed base. And it is an important example of really the risk mitigation in this transition of the business because, as I mentioned, the (31:06) stands between the manufacturer and the patients. And so, it's a fairly straightforward market to transition. It's been an incredible growth driver. I mean, really, France has been a phenom. And we do expect that growth to moderate in the near to medium-term. But it's been a pretty spectacular performer for us over the last quarter. And the businesses – the different markets across Europe sort of span the spectrum from the French model where there is a middleman like the (31:40) to more a U.S. type of models like the UK. But we do expect that market to continue to grow, but we are kind of penetrating at large percentages now and so the growth will moderate.

This is Mike. I would just add that we have – as we've seen in the United States strong growth, we've seen very strong growth across the European markets and where we're direct in Canada. And so there is just a tremendous amount of adoption. So it's not a story all about France. I think the point about France is just it's a wonderful part of the story. And, again, it's a fairly easier operating model to transition to. Margaret M. Kaczor - William Blair & Co. LLC: Great. I appreciate that extra color. In terms of the follow-up, can you talk anything about the U.S. growth and maybe the launch plan for Dash, any kind of specific details you could share of when you think that's going out, maybe incremental detail of patient adoption, how you roll it out into the installed base? Thanks.

Sure. So, we had a great quarter – actually we had a great year so far in the U.S. Our pipeline is incredibly strong and that's been driven by commercial execution and direct-to-consumer marketing through digital channels. And so that's really increasing awareness and then the pull-through because of market access and the field performance has been very strong as well. And I think it's evidence that this focus on multiple daily injections and the value proposition there is really strong. And so that distinction is what's helping to fuel Omnipod's growth. As it relates to Dash, the feedback we got at ADA is that the platform will be even simpler and should strengthen our value proposition and our differentiation in that patient population. So we'll remain focused on that same user group. In terms of the rollout, we're keeping that kind of under wraps for competitive reasons. But I will say that we're going to have attractive avenues to access the system for both our existing users and new users. And we're really excited about the early feedback. And so we're going to do whatever we can to make sure it's a successful rollout and that also we can ramp quickly and supply what we think is going to be pretty great demand out there. But, I guess I have tempered those remarks by reminding everybody that our business model is a recurring revenue business model. So, it's not like this drives a bolus of revenue that you see with the capital models that exist out there. Margaret M. Kaczor - William Blair & Co. LLC: Great. Thanks.

And our next question comes David Lewis from Morgan Stanley. Your line is now open. David Ryan Lewis - Morgan Stanley & Co. LLC: Good afternoon. A couple of questions on Ypsomed. The first is on margins, the second is just on near-term business momentum. So, as we assume margins, Pat or Mike, the new target of 70% makes perfect sense to us 400 basis points to 500 basis points of improvement. But how much of that – how much was going direct a factor in the initial 65% number? Basically what I am trying to get at is, is 70% the ceiling or whether there are underlying improvements still not reflected in that 70%? And then I had a quick follow-up.

This is Mike. So, when we had talked about 65% target, at that time, we were evaluating whether to go direct or not and so it factored in at the existing business model at that time, which was not going direct. And that's why in going direct and that adding about 400 basis points to our model, that's how we raised from the 65% target to the approaching 70% target. In our Investor Meeting in November, we laid out the key drivers of what gets us from where we are today of approaching 60% to the previous target of 65%. And a significant portion of that was associated with manufacturing and operation supply chain improvements, including the move to our highly automated U.S. manufacturing. There are also commercial opportunities that were factored in there as well. Now, with the higher targets, that's reflecting in full the opportunity that we now have with the direct business model in Europe. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. So to the extent that there is underlying manufacturing opportunities that got you to 65% or conservative, there could be upside of the 70% number, as 70% just reflects Ypsomed, nothing else?

The way I would answer that is we have consistently set targets, not that we would be satisfied with any of our targets, but the targets need to be credible. So we have direct line-of-sight, as Pat said in the past and I have, to these targets. Is there upside to the target? There is always upside. We would say that our targets though are realistic. In that, look, there is downside risk too. So, we will not stop in driving the value of this business and we're very pleased with the progress we've made today. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then – thanks, Mike. And then, Pat or Shacey, Ypsomed is obviously a best case outcome and I appreciate your comments on how you'll manage disruption near-term. If you think about the back half of 2017, the ex-U.S. guidance sort of embeds some slower momentum. Do you think that captures the risk here and how should we think about – if there is going to be disruption, how we should weigh sort of first half 2018 versus second half 2017? Thanks so much.

Sure. Yeah. David, I think, our guidance is appropriately conservative given the transition negotiations and the pending change. So I do think it factors in that risk, but there is a clear line-of-sight to the upper end of the guidance because our interest with our distributor are somewhat aligned. So they make profit on pods. They are contractually obligated to continue to grow Omnipod between now and the expiration of the agreement. As Mike mentioned, they have a per pod fee following the 12 months after expiration of the agreement. And then they also have reputational risk if they don't continue to support Omnipod in the market. So, all of those things we believe help us mitigate risk. And I think the thing to remember is this really is short-term noise. This is a great move for us. It unlocks our international business opportunities both in Europe and beyond over the medium and long-term and just drives incredible value for us. So, yes, the guidance factors in that risk and I think we're ready to execute and pull that business over in 2018. David Ryan Lewis - Morgan Stanley & Co. LLC: Great. Thanks so much.

And our next question comes from Danielle Antalffy from Leerink Partners. Your line is now open.

Hey, guys. Thanks so much for taking the question. Congrats on a really great quarter.

Thanks, Danielle.

Thank you.

So, just a quick question on the U.S. Omnipod numbers in Q2. Shacey, you mentioned that the installed base in the U.S. was up 15%, as expected, but U.S. revenue beat by nearly $1 million at the top end of the guidance range. So, just wondering if you could talk about what's driving that outperformance there, if the installed base is growing as you'd expect. Is that utilization or pricing? What's going on there?

Yeah. It's just channel mix distributor versus direct.

Okay. Got it. And then my next question is on – well, I guess, following up on that is whatever that mix is, is that sustainable or is it just pretty volatile quarter-to-quarter?

I think it's puts and takes. Some of it is sustainable and some of it will just naturally fluctuate quarter-to-quarter.

Okay. Understood. And then my next question was, at ADA, there was a lot of excitement, at least I thought, around well, of course, Dash, but also pumps for type 2 patients. And I was wondering if you could give an update on when – timing for your type 2 products and how we should think about the ramp when those products do come to market. And does the business change at all your go-to-market strategy for type 2 patients? Is it going to be significantly different than for type 1 patients? Thanks so much.

Yeah. Thanks, Danielle. That's a great question. For our type 2 product, the limitation in serving the type 2 market is really about the reservoir size. If we want to keep the form factor that everybody loves with Omnipod, we have to figure out a way to serve people who need higher volumes of insulin on a daily basis for type 2 patients, who typically require anywhere from two times to five times more insulin on a daily basis than a type 1 patient. And so we do that with the concentrated insulins program. As I mentioned, the timing for those – U500 will hit the market in 2019 and U200 will hit the market in 2020. U500 is for very highly insulin-resistant patients and so a smaller niche, although we will be the only pump approved for U500. And so it's very likely we'll take a big portion of that population. And then U200 is really the molecule that unlocks the type 2 market for us. And when we think about the type 2 market, we think about insulin-dependent type 2s. And so if you take that volume, that's approximately two times to three times the size of the market – sorry, of our market today – sorry, it doubles or potentially triples the market that we have today with type 1. So we would see acceleration there, but our data demonstrates that most people who use or who are insulin-dependent type 2s are seen by an endocrinologist. So it doesn't really mean that we have to expand our channel, but we will have messaging. We will have a product that is uniquely developed for a patient with type 2 diabetes versus the type 1.

Thanks so much.

And our next question comes from Mike Weinstein from JPMorgan. Your line is now open.

Thank you and congratulations as well on the quarter, obviously amazing performance. And let me – I want to circle back on Ypsomed and thanks for all the different commentaries. It was helpful. I do want to understand kind of beyond the fact that they're going to get paid on the next 12 month revenues post the transition, kind of, what is the obligation for them to continue to add new patients? I think their commentary on their own call suggested that the incremental adds from here will be relatively limited.

Mike, I think, the answer is that the contract doesn't expire until June 30 of 2018. And both parties are contractually bound with certain obligations. And one of their obligations is to actively promote the Omnipod System throughout Europe. And so I think with that – plus the fact that they have a financial incentive because they get profit on every Omnipod that they sell between now and then as well as this termination fee that's provided for and the reputational risk. I have full faith that they will live up to the obligations of the agreement.

And so that doesn't include – that does include the continued investment in adding new patients to the installed base?

Correct.

Okay. And then I just want to go back to some of the math that you shared. If I took the commentary about European pricing being on average over (43:43) 20% discount to the U.S. and then your commentary about the implied 50% plus increase in realized pricing in going from distributor to direct, the math works out to a realized price today to Ypsomed of just under $15. Is that correct and if so does that imply a gross margin on that business of about 30% today?

Hi, Mike. It's Mike. In answer to your question, so we have not had a practice of confirming pricing specifically, but we did give more color here specifically, so that you could get comfortable with the modeling. So, I think, it's fair to say that it is still a discount off U.S. pricing, but it's a sizable increase off of our current pricing to Ypsomed. In terms of the gross margin improvement, I think, the important way to think through that is just what we said. In that, it improves total company gross margin by 400 basis points on a full year basis, half that for 2018 as you would expect since the agreement ends mid-year.

Okay. One last one to clarify, Mike. I think you said $45 million to $50 million incremental OpEx. Do you expect to – when do you expect that to layer into the P&L?

So I did want to give – since this is a change in business model, I did want to give a view of a run rate – an annual run rate for the European business. And I did say $45 million to $50 million. That's correct. It is important to note that we are standing up this business. We've been doing a tremendous amount of work over the last couple years to prepare for this. And there is spending in 2017 associated with standing it up, but there will also be, we expect, approximately $10 million of standup cost that are non-recurring. And then there is also this fee to Ypsomed to essentially buy the book of business that's paid based on the number of customers that transition to our product. The $45 million to $50 million was really once we're running the business direct, what does the run rate look like, because it is a change from our historic business model. In terms of how it ramps up next year, we'll give more clarity as we always do when we give 2018 guidance in February as part of our year-end results. But I think it's fair to expect that the cost will ramp up through the year because we're growing the business and establishing that infrastructure over time. [Technical Difficulty] (46:28) highly confident of the seamless transition mid-year.

So what is that $45 million to $50 million number, just to understand what you're saying?

That's the run rate operating expenses of go direct business in Europe.

We expect to be come second half of...

I'm sorry, Mike. Could you repeat that?

Okay. Mike, we lost you. Let's go to the...

And our next question comes from Tao Levy from Wedbush. Your line is now open.

Great. Thanks. Good afternoon. Just maybe one clarification and I'll have two questions. Is my math correct that we're talking about the current run rate business from the end user side of things for Ypsomed being around $140-ish million plus whatever the PDMs sell for over there? Is that in the ballpark?

Tao, this is Mike. I just want to make sure I'm understanding your question correctly because we gave guidance for the year for our international...

I'm sorry, when you take over the account.

Oh, I'm sorry.

Yeah, truing up, what would that book of business look like under...

Yeah. Well, I think, what we've been saying is that the business is growing very nicely from a volume standpoint. From a pricing standpoint, we expect the pricing to improve mid-year by approximately 50% from our historic pricing. And so with our guidance that we've already provided of $105 million to $108 million for international, obviously, not all of that is Europe. It's roughly 80% or so. But that's the basis for doing estimates of 2018 run rate. And, again, we'll give more clarity specifically on 2018 when we do our year-end call.

Okay. And just also to be clear, following up on what Mike had asked. My German is not great, but I thought the Ypsomed had said they were going to end the next year at around 65,000 installed base and kind of grow it at that 30%. Is that correct or did they say that it wasn't going to grow?

They did indicate on their call that their business would continue to grow. The number that I provided, Tao, was the approximate patients that exist today. So, that's 50,000. And I don't recall the exact number, but I think it was north of 60,000 that they indicated on their call. And my German isn't great.

Okay. Thanks.

And our next question comes from Jeff Johnson from Robert Baird. Your line is now open. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good afternoon, guys. Mike, maybe just following up, I think, what an earlier caller, Mike, was getting at on the SG&A, the $45 million to $50 million. I just want to understand your comments there. Is that $45 million to $50 million incremental to the cost you're putting in right now into that business to try to make the transition smooth in the international market?

Let me be crystal clear. So, as a direct business in Europe, we expect the annual run rate operating expenses to support that on a direct basis to be $45 million to $50 million. That is the annual run rate when we are direct in Europe. Up until that time, we are ramping up the team. We have a clear plan, cross-functionally. And so, the cost will be ramping up to that, but that will be the run rate once we assume direct distribution on an annual basis mid-year. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Okay. So, we don't have to step up that full $45 million to $50 million come the transition period?

I think what's important to understand though is there will be stand up expenses in 2018, but we have to hire all the people. And the full run rate spending, once we are fully operational, is $45 million to $50 million. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Understood. And then on the inventory side, I would assume Ypsomed is holding at least one month or two months of inventory, maybe a little bit more. Will that net out against your first half revenues or in other words will they start drawing into their inventory base as we get into the last month or two months of their contract, that we need to account for that in our revenue estimates for you? Or will there just be some sort of return at the mid-year that we'd kind of one-off out of the model at that point?

Jeff, this is Mike. I would not presume that inventory has a meaningful impact on your models. We have been managing, as we've been saying for quite some time now, managing to make sure that there is not a lot of inventory in the channel. With all of the improvements that we have made in manufacturing and supply chain, there really is no need for it. And so, I would not expect that inventory will have a meaningful impact on your models. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Okay. That's helpful. And then if I could squeeze in a follow-up here. Just when I think of some of the Omnipod Horizon trials and progress you've made so far, starting the third IDE – Shacey, maybe this is a question for you. On the first two, you've already gone through pediatrics and adult exercise postprandial, some of those things. I've only covered the space for I don't know two years or three years at this point, but you've made a lot of progress in a short while here in six months or nine months. Is there something about Omnipod? Is it the simplicity of it, the safety of it? Is the FDA just getting more comfortable with some of these trials? But what has enabled you or the Horizon system to move so quickly through some of these different IDEs relative to maybe at least what I feel like some of your competitors have done over the last five years?

Well, I think, the primary thing is the team that is working on the development program. We have a world-class Medical Director in Trang Ly, who has been involved in every single APE clinical program prior to coming to Insulet. She knows what great looks like and she knows how to avoid some of the pitfalls that other programs ran into. We have an extraordinary research and development team, particularly the software and chip (53:05) team and mobile technology team in San Diego and the pod – I can't even single them out. They're working very, very well together, the device team, the software team to make rapid iteration and progress on the innovation front. And then you highlighted it. The FDA has been very supportive. I would describe our relationship with them as collaborative. We're getting the guidance that we need. And we feel like we've got a very tight clinical plan that we're executing on. So, I would agree I get so excited when I think about the progress the team has made in such a short period of time and even more excited when I think about the product that we're going to launch and the differentiation that we'll bring to market, so.

Go ahead, operator.

And our next question comes from Raj Denhoy from Jefferies. Your line is now open.

Hi. Good afternoon. I wonder if I could ask a product development question. One of the things on Horizon that has kind of stood out as the fact that you're using a receiver on Android device that's kind of locked down, right, and there has been some talk about whether you could open that up and maybe have a connected device as the ultimate receiver and maybe the FDA is getting more willing to do that. Is there any updates on that front?

And by connected device, do you mean mobile phone?

Exactly, right. So, it would add some cellular connectivity to it.

Yeah. So, we continue to be in great, I think, active discussions with the FDA regarding that. And that's certainly our hope, if that we could get to phone control maybe even before Horizon. I think the FDA recognizes and now has set up panels of experts to work on cybersecurity for mobile devices and moving to phone control for medical devices. And we're actively engaged in those discussions and those panels. And so we're working very hard on behalf of our customer base to get to that – to phone control because we know it's what they want and we'd like to be leaders in that area.

Okay. That's helpful. And obviously it adds this question, but 670G, right. So there has been an automated insulin delivery device out there, a little bit limited in its launch, but clearly you're not seeing your numbers, but I am curious whether there is anything it offer in terms of feedback from marketplace or whether you think you're through kind of the worst of people's worry around that, if there's any update on that front would be helpful.

I think we've heard what you've heard. There have been some bumps in the launch. And we are hearing from endos that they are becoming more familiar with just how much time and work it's going to take to – and that they are going to need to devote to support and train people on these more complex systems. And I think that's just highlighting the difference in our value proposition around simplicity and ease of use. And I think it supports our messaging that there may be some reason to use a device like 670 on a patient, who is wearing a tube pump and is willing to put in the work to get whatever incremental benefit they are going to out of that technology. That's not our patient population. Our targeted demographic is the multiple daily injection user. And for those people, we can help bring them to pod therapy and better glycemic control, better quality of life that they would not have gotten because they weren't willing to get onto to a tube pump. So I think it just highlights really the segmentation in the market and that we're a different value proposition and a different patient target.

And our next question comes from Doug Schenkel from Cowen. Your line is now open. Ryan Blicker - Cowen & Co. LLC: Hi. This is Ryan in for Doug. Thanks for taking my questions. You noted the installed base growth of 15% in the U.S. year-over-year and that your pipeline is as strong as it's ever been. Based on my math, it seems U.S. new patient starts approximated mid-to-high teens year-over-year growth in Q2 and maybe even 20% plus. Am I in the right neighborhood?

We're purposely not giving that detail any longer because it's misleading in terms of its connection to revenue growth and that just goes back to our business model. But really the best predictor of revenue growth is installed base because you have to take into consideration that that's 90% plus of what drives our revenue in a quarter and attrition also drives or retention rather also drives revenue. And so, I would just focus on the fact that we grew our installed base 15% in the United States the last quarter.

What I would – this is Mike. I would just say. I mean we have seen increasing momentum quarter-by-quarter and are very pleased with the growth in new patients.

Thanks, Mike. Ryan Blicker - Cowen & Co. LLC: Understood. And then maybe just one follow-up on Drug Delivery. I believe at your Investor Day last November, you talked about Amgen wanting to launch the Onpro kit internationally. We haven't heard much about that since then. Can you – anything you can provide there? Is it something that's possible for 2018?

That's really a question for Amgen. Operator?

And our next question comes from Jayson Bedford from Raymond James. Your line is now open. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon and congratulations on the performance. So, just a couple quickies and I apologize if I missed this. But on the payout to Ypsomed, the fee, is it paid on total European installed base at the time of the switchover? Is it just on the folks that they add over the next year?

Jayson, this is Mike. So the fee is calculated based upon the number of pods that are sold in the 12 months after the contract expires, which is June 30, 2018, to people who had previously purchased Omnipod devices from Ypsomed. So, it's based on the number of pods sold. So, as such, they have every incentive to continue to drive the number of patients on that device through June 30 of 2018 and that fee is maximized based upon there being very limited attrition of those patients in the 12 months following the contract expiration. So, from our perspective, we think it's a very helpful fee, because it aligns our interest in really making sure that the patients are taking care of, that we continue to grow Omnipod in Europe and that there is a successful transition of the business. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. That's very helpful. Just as a follow-up to – does going direct in Europe change your international revenue goals for 2021 that you laid out at the Analyst Day?

This is Mike again. So the goals that we laid out at the Analyst Day of $1 billion in revenue, driven by growth across all of our product lines with strong growth, 20% CAGR, across our product lines has not changed at all. As we said at the time, the focus is on growing the business. We don't need any one product or area to have outsized impact. It was never meant to be. Here is exactly the growth that we're going to have in U.S. versus international versus Drug Delivery which really meant to say we have so many opportunities across this book of business. That's why we're confident in the $1 billion target.

And our last question comes from Suraj Kalia from Northland Securities. Your line is now open.

Good afternoon, everyone. Congrats on a great quarter. So, Pat and Shacey, let me piggyback on some of the Ypsomed related questions. I know you all have provided a lot of information. We do appreciate it. Ypsomed has a pretty significant outreach effort and they have indicated 30% plus growth with their footprint. How do you all see the correlation – and forgive me if I missed this – between feet on the ground, the geographic disparity, the relative price elasticity? I know you all have given $40 million to $50 million incremental OpEx on a normalized basis or a steady state condition. I'm more curious if you can give us one additional layer of color. What does this mean in terms of how you all target geographies, people, so on and so forth?

Well, I will just remind you that the business is actually fairly concentrated. And so that's one factor when you think about what our investment and what the size of our team needs to look like. And then the other thing I'll say is that Ypsomed had a large portfolio of commodity devices in addition to Omnipod and so they weren't 100% focused on Omnipod and, obviously, recently launched their competitive device. So I think we're expecting once this team is fully – the sales team is fully productive that we will get benefit from the sole focus on Omnipod and our growing product portfolio. And that may mean that our team needs to look different. And then when you look across the continent and even among our four largest markets, their business models are very different. So, you may have a different type of commercial presence depending on the market that you're serving. I talked about France in my opening remarks. Our commercial organization in a country like France is going to look very different than our commercial organization, for example, in the United Kingdom or Germany. But we will make and we are – we plan to make – we are making the right level of investment to make sure that we best serve that marketplace and all of the important customers to us in Europe.

And just from another perspective. As Shacey mentioned, we're currently in 13 markets in Europe, concentrated in four. If you take an individual country in Europe, it's about the size of our Canadian operation.

That's correct.

So, it's a series of countries that are about the size of our business in Canada. So, we have every confidence we're going to be able to do this very effectively during the transition period.

Fair enough. And last question from my side, Pat or Shacey again. Can you give us some color on the differences or the relative utilization rates between U.S. patients and European patients? Here's the reason why I ask. We can do the math from the number of patients. We can reverse engineer the ASPs, what potentially you guys are going to charge. And, obviously, the key element here is knowing how many pods per month per patient will be used. And what I am trying to really get at is even if we don't increase the number of patients, let's assume that happens after you all separate, if nothing even else happens, this is the step-up in revenues just based on this direct transition. So I am trying to get to the bottom of that. Any color on the utilization between these geographies would be great. Thank you for taking my questions.

In terms of utilization per patient, we're really not in a position to give you that information. I think you can run your models and come up with reasonable estimates. What I would say about the European market is that in terms of pump penetration, Europe is only about 20% penetrated in pumps versus 30% in the United States. And so, we think there is great opportunities to expand the market in Europe through a higher penetration. And, secondly the attrition rate is about 9% in the U.S. and it's only about 2% to 3% in Europe. So, once a patient gets on a product in Europe, they'll start the reimbursement for life, which is vastly different than the every 18 month people transition during – in the United States transition between insurance plans.

Thank you. And at this time, I would now like to turn the conference back to Patrick Sullivan.

Great. Thank you, operator. We are absolutely positively thrilled to establish a direct presence in Europe. We've done our homework and we're very prepared and we're ready for the challenge. We have the right team in place to drive significant performance and success. And we have the right tools in place to win and achieve our goal of $1 billion in revenue in 2021. I'd like to thank the Insulet employees for their hard work and dedication to ease the burden and improve the lives of people living with diabetes and other diseases. Thank you for joining us on the call today. We look forward to sharing our progress during the course of what is shaping up to be a very exciting 2017. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.