DexCom, Inc. (NASDAQ:DXCM) Q1 2025 Earnings Call Transcript

DexCom, Inc. (NASDAQ:DXCM) Q1 2025 Earnings Call Transcript May 1, 2025

DexCom, Inc. misses on earnings expectations. Reported EPS is $0.32 EPS, expectations were $0.3272.

Operator: Welcome to the DexCom First Quarter 2025 Earnings Release Conference Call. My name is Louella, and I will be your operator for today’s call. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the call over to Sean Christensen, Vice President of Finance and Investor Relations. Sean, you may begin.

Sean Christensen: Welcome to DexCom’s First Quarter 2025 Earnings Call. Our agenda begins with Kevin Sayer, Dexcom’s Chairman, President and CEO, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. Following our prepared remarks, we will open the call up for your questions. At this time, we ask analysts to limit themselves to one question each so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our first quarter 2025 performance on the Dexcom Investor Relations website on the Events and Presentations page. With that, let’s review our safe harbor statement.

Some of the statements we will make on today’s call may constitute forward-looking statements. These statements reflect management’s intentions, beliefs and expectations about future events, strategies, competition, products, operating plans and performance. All forward-looking statements included on this call are made as of the date hereof based on information currently available to Dexcom, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in DexCom’s annual report on Form 10-K, most recent quarterly report on Form 10-Q and other filings with the Securities and Exchange Commission.

Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this call or to conform these forward-looking statements to actual results. Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP. Unless otherwise noted, all references to financial measures on this call are presented on a non-GAAP basis. This non-GAAP information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our first quarter earnings call for a reconciliation of these measures to their most directly comparable GAAP financial measure.

Now I will turn it over to Kevin.

Q&A Session

Kevin Sayer: Thank you, Sean, and thank you, everyone, for joining us. Today, we reported first quarter organic revenue growth of 14% compared to the first quarter of 2024. This represented our second straight quarter of reaccelerating revenue growth as we benefited from continued strong category demand, recent access wins and focused execution by our team. In our U.S. business, we successfully balanced strong demand while navigating short-term supply dynamics. Our teams worked hard to provide consistent support for our customers, channel partners and physician community. We moved quickly to ensure limited customer disruption and set up clear lines of communication with all involved stakeholders. This included launching a public website that provided status updates and direct customer support for anyone impacted during this transition.

Our manufacturing and logistics teams worked around the clock to make sure our product was where it needed to be to meet our customers’ needs. We work closely with our distribution partners to clearly align our updated supply time lines with their customer demand, and we would like to acknowledge the great work of these partners in providing excellent care to our users. As you can see, we prioritized customer care throughout this period, and I hope this commitment continues to be noticed. We experienced an acceleration in demand from new customers, which again came in at record levels during Q1. We are clearly seeing the benefit of expanding our commercial reach last year. After significantly expanding our prescriber base in 2024, we are going deeper across these practices as physicians expand their Dexcom CGM prescribing patterns.

Importantly, we made these commercial investments knowing that new Dexcom technology and broader access were just around the corner. Since that time, we introduced Stelo as the first over-the-counter CGM, launched several new software and connectivity updates to enhance the customer experience and secured much broader coverage within the type 2 market. We started the year by announcing that we had secured access at 2 of the 3 largest PBMs for anyone with diabetes regardless of whether they use insulin. While it is still early, we’ve been very encouraged to see physicians quickly adjust their prescribing patterns to match this new coverage. In fact, during the first quarter, we already saw a notable uptick in new customer starts coming from the type 2 non-insulin population compared to any time in our company’s history.

We’ll now look to build on this momentum through targeted awareness campaigns and by advocating for even broader type 2 coverage over time. Along those lines, I’m excited to share that as of this summer, the third major PBM will also begin covering Dexcom G7 for anyone with diabetes in some of their key formularies. Having the 3 largest PBMs now covering Dexcom for all people with diabetes represents a true step change in the coverage landscape. It also indicates that a clear consensus is forming on both the health and economic benefits of incorporating CGM earlier in diabetes care plans. Between these 3 large PBMs and additional coverage we expect to finalize in the coming months, Dexcom will have coverage for nearly 6 million people with type 2 diabetes who are not on insulin by the end of the year.

While this still represents only a portion of this 25 million person population in the U.S., we often see smaller and customized plans quickly follow suit of the larger PBM formularies. We’ll also continue to strengthen our case with payers with additional data readouts in the coming quarters. This includes our recently announced randomized controlled trial for people with type 2 diabetes who are not on insulin. Similar to our MOBILE and DIaMonD studies for the insulin using population, we believe this data set can become the centerpiece of our broader type 2 non-insulin evidence road map. This level of evidence has historically been a key factor in driving definitive changes to standards of care and unlocking even broader access globally. As we continue to advocate for broader type 2 coverage, we have already greatly simplified access to Dexcom technology through the launch of our over-the-counter biosensor Stelo.

Stelo continues to attract a wide range of new customers across the type 2 diabetes, prediabetes and health and wellness landscapes. We have also seen growing use of Stelo among the physician community who can now tailor their Dexcom care plans based on each customer’s coverage and metabolic health. While we are still early in this launch, our team has moved quickly to enhance the Stelo experience with new software updates and broader distribution. During the first quarter, this included launching a 180-day data look-back feature, which was in direct response to early customer feedback. This is a great example of our ability to quickly iterate the Stelo app to provide new customer insights and deliver a more personalized experience. Stelo also officially went live on the Amazon storefront during the quarter, which provides our customers another easy access point on one of the highest volume e-commerce sites in the world, and we expect even more distribution partners to broaden our commercial access in the future.

These updates are already resonating with our customers. Over the course of the first quarter, we saw even greater Stelo customer experience metrics in response to these updates, and we believe that we’re just getting started with what we can do to lead our customers to greater metabolic health. Our first quarter results show that our commercial teams are performing very well, and we are excited to build from this position of strength by announcing the addition of Jon Coleman as our new Chief Commercial Officer. Jon brings over 30 years of global commercial leadership experience to our organization across multiple health care segments and channels. Over this time, he has established a proven track record of execution, making Jon a great fit for Dexcom at this important point in our company’s history.

We’re excited to have him lead our commercial organization. I would also like to address the warning letter that our company received from the FDA in March. This letter was related to observations made by the agency following the inspections of our San Diego and Mesa facilities during 2024. We take any FDA recommendations very seriously. So our team immediately began instituting corrective actions to address these observations. While we were disappointed to receive a warning letter, I’m incredibly proud of how our teams have rallied together with a thorough review and response, and we look forward to working together with the FDA to further strengthen our systems and processes. As one example of our ongoing collaboration with the agency, we were excited to recently announce FDA clearance for our 15 Day Dexcom G7 System.

This marks another innovation milestone for our company as our 15 Day product advances both wear time and accuracy levels for G7 with performance data demonstrating an MARD of 8.0%, this sets a new bar in the industry in terms of sensor accuracy. We are incredibly excited to bring this product to market. As previously mentioned, we plan to launch our 15 Day G7 System in the second half of the year, and our team is working quickly to prepare for this rollout. This includes working with payers to establish coverage in advance of launch and collaborating with our pump partners to ensure a seamless transition for G7 compatible automated insulin delivery systems. With that, I’ll turn it over to Jereme.

Jereme Sylvain: Thank you, Kevin. As a reminder, unless otherwise noted, the financial measures presented today will be discussed on a non-GAAP basis. Reconciliations to GAAP can be found in today’s earnings release as well as the slide deck on our IR website. For the first quarter of 2025, we reported worldwide revenue of $1.036 billion compared to $921 million for the first quarter of 2024, representing growth of 12% on a reported basis and 14% growth on an organic basis. As a reminder, our definition of organic revenue excludes the impact of foreign exchange in addition to non-CGM revenue acquired or divested in the trailing 12 months. U.S. revenue totaled $751 million for the first quarter compared to $653 million in the first quarter of 2024, representing an increase of 15%.

As Kevin mentioned, our team did a great job navigating short-term supply dynamics while supporting both new and existing customer demand. We experienced another quarter of strong new customer demand in the U.S. with a particularly notable uptick coming from the type 2 non-insulin using population. By having the broader sales force in place, we were able to quickly take advantage of the coverage expansion that occurred in January to drive a nice acceleration in new patient performance, and we look forward to building on this momentum with our additional coverage kicking in over the course of the year. Additionally, as we previously indicated, we saw the combined impact of channel mix and rebate eligibility moderate during the first quarter.

This helped narrow the gap between U.S. volume and revenue growth compared to the prior 2 quarters. International revenue grew 7%, totaling $286 million in the first quarter. International organic revenue growth was 12% for the first quarter. Our international business demonstrated pockets of strength, particularly in areas we have highlighted recent coverage expansions in the type 2 landscape. Examples of this will be continued growth of our business in Japan as well as our growth of Dexcom ONE platform in France. We continue to like our overall strategic position as regional access continues to grow. We see several opportunities for expansions of type 2 coverage upcoming in 2025 and are building good momentum in the core international markets to eventually match the level of coverage that we have achieved in the U.S. Our first quarter gross profit was $596.2 million or 57.5% of revenue compared to 61.8% of revenue in the first quarter of 2024.

As we said on the fourth quarter call, we expected Q1 gross margin to be below our full year levels because of historic seasonality as well as having to navigate some of the near-term supply dynamics that were caused by a shipment of sensors that was damaged in the fourth quarter. We are proud of how we navigated the first quarter to prioritize the care of our customers. But as Kevin alluded to earlier, we did have to incur some incremental costs to do so. As an example, we have expedited our lead times by chartering direct flights to fulfill distribution centers, which comes at a higher cost than our traditional freight processes. We exit the first quarter in a much better position with our channel inventory levels. However, there is still work ongoing to get our internal inventory back to normal levels.

As a result, we expect some of these costs to continue until we are back at normal inventory levels, which we have factored into our full year guidance update. Operating expenses were $453.1 million for Q1 of 2025 compared to $428.9 million in Q1 of 2024. Operating income was $143.1 million or 13.8% of revenue in the first quarter of 2025 compared to $140.2 million or 15.2% of revenue in the same quarter of 2024. Adjusted EBITDA was $230.4 million or 22.2% of revenue for the first quarter compared to $220.9 million or 24% of revenue for the first quarter of 2024. Net income for the first quarter was $127.7 million or $0.32 per share. We remain in a great financial position, closing the quarter with approximately $2.7 billion of cash and cash equivalents.

This cash position, along with our strong free cash flow profile provides a lot of ongoing flexibility in our capital allocation decisions. Along those lines, we are excited to announce a $750 million share repurchase program today. Given our strong revenue and cash flow growth outlook, we see this as an opportunity to enhance our capital structure while still giving ourselves plenty of cash available to address our 2025 convertible notes and any other strategic uses of capital. Turning to guidance. We are reaffirming our prior revenue guidance of $4.6 billion, representing growth of 14% for the year. For margins, we are reducing our full year non-GAAP gross profit margin guidance to approximately 62%, while reaffirming our full year non-GAAP operating margin and adjusted EBITDA margin guidance of approximately 21% and 30%, respectively.

Our new gross margin guidance reflects the impact of our first quarter results and a few additional factors. So I want to provide additional color here on how we’ve approached it and the cadence throughout the year. We expect the first quarter result to have an approximately 75 basis point impact on the full year gross margin relative to our prior guidance. As we continue to rebuild our inventory levels while addressing increasing demand, we have factored in an additional 100 basis point impact to our global freight costs to support expedited shipping. We expect that this impact will lessen as we move throughout the year. We have also built into this gross margin guidance a 50 basis point impact of inflationary pressures from tariffs in the supply chain.

While we do not necessarily expect a large direct tariff impact given our diverse manufacturing footprint and the health conditions that we address, we nevertheless want to be prudent given the fluctuations in the global trade landscape and the indirect impact tariffs have on supply costs. Finally, we anticipate an approximately 25 basis point impact to our global manufacturing costs based on fluctuations in the U.S. dollar. Despite the pressure on gross margin, we are in the position to offset that pressure and reiterate our operating margin and adjusted EBITDA margin guidance. Our teams are doing a good job prioritizing investments in the right areas while setting up our functions to scale efficiently. With that, we can open up the call for Q&A.

Sean?

Sean Christensen: Thank you, Jereme. In addition to Kevin and Jereme, we will also have Jake Leach, our Chief Operating Officer, joining us for our question-and-answer session. As a reminder, we ask our audience to limit themselves to only one question at this time and then re-enter the queue if necessary. Please provide the Q&A instructions.

Operator: [Operator Instructions] Matt Taylor from Jefferies is on the line with a question.

Matt Taylor: Congrats on a good quarter. I wanted to touch on the U.S. growth improvement here. And see if you could talk a little bit about 2 things. One, did supply have any impact on the revenue growth? Could you characterize that? And then you keep talking about the gap closing between dollars and volumes. I was wondering if you could comment on what you think market volume growth is or your volume growth is so we can understand what the revenue growth could be through the year and how quickly that gap closes would be helpful.

Jereme Sylvain: Yes. Matt, thanks for the question. This is Jereme. Certainly happy to answer it. In terms of supply dynamics, I think we exited the quarter with normal supply levels in the channel. And so we had to work pretty hard over the course of the quarter to make sure we got there. I think everybody knew and we signaled it in the February call that we were going to navigate through that. So kudos to the team for all the work that they did to get there, prioritizing customers first. So what you see in the revenue figures is, I would say, a normalized inventory level and therefore, really a normalized pattern. In terms of the impact then on new patients, look, it was a record new patient quarter. So I think we were really happy to see that at the end of the day.

So we still had very, very strong performance during that window and due to all the work that the teams did to navigate through there. In terms of what that then means for volumes, et cetera, while we don’t necessarily give volumes by region, what I think we have done in the past is we’ve given you new patient or total patient details. And we exited last year at about a 25% patient increase, which is a good analog for volume growth. And given the performance we saw over the course of the quarter, record new patients, there’s no reason to believe that the volume growth wasn’t consistent with that. So that will help for the models. It will also help if you consider Stelo as a component of that as you’re thinking about what that impact is. But the big takeaway, and I think you’re pointing at it is that price volume delta is coming in as we said it would, and you saw that play out in the quarter.

Operator: Your next question comes from the line of Larry Biegelsen from Wells Fargo.

Unidentified Analyst: This is [indiscernible] on for Larry. Maybe just on guidance. You delivered 14% organic growth in Q1, but left full year guidance unchanged. So Jereme, I mean, how do you see the rest of the year playing out, particularly in the second half where the comps do get easier? Just trying to understand why growth in the full year would be the same as in Q1. And then maybe just also on the gross margin guidance. I mean, is there anything assumed in that guide from the 15 Day launch?

Jereme Sylvain: Yes, sure I can answer those. In terms of the guidance for the full year, the big takeaway is first quarter is first quarter. There’s a full year up in front of us here. And so after a quarter, we felt it appropriate to see how the year unfolds before we start changing anything around guidance. We gave the guidance for the year, we really wanted to give a commitment on the full year. I think the big takeaway is we’re off to a good start, a record patient quarter, and you saw the growth. So certainly happy with that. It’s not saying anything other than we’re happy with the quarter. We’re bullish on the business. It’s just one quarter. We want to see how the rest of the year unfolds. In terms of the guidance and how we’re thinking about 15 Day, there was always a little bit of 15 Day in the guidance, the original guidance we gave, and there’s still a little bit of that in the current guidance we gave, and it’s commensurate with the launch expectations of the product, which is in the second half of the year.

I think when we gave the guidance at the start of the year, we mentioned it was a very small amount where we wouldn’t necessarily change our guidance. If the 15 Day time line change, just given as a total of our population of sensors, it’s a relatively small amount as we start to ramp it up. That remains true. So nothing really changed there. It is in the guidance, but nothing changed from the last time we provided in terms of our assumptions.

Operator: Your next question comes from the line of Robbie Marcus with JPMorgan.

Robbie Marcus: Congrats on a nice start to the year here. Wanted to ask on the type 2 patients, particularly non-intensive and basal patients. And you said you had good growth in non-intensive type 2. I imagine basal as well. And just wanted to get a better understanding of sort of the utilization and reorder rates and patient trends you’re seeing there. I realize basal is predominantly insured patients and a growing nonintensive, but both for insured and noninsured and some of the things you can — that you’re doing to help keep patients reordering at high rates.

Kevin Sayer: Yes. Thanks, Robbie. We have stated for a long time that we see very good retention rates in these populations, particularly given the state of reimbursement. When as we expand coverage for the basal insulin population, also the type 2 population in general, even the nonintense no insulin type 2 patients with reimbursement, we see utilization very good and retention very good as well, a bit lower than our type 1 patients, but not significantly. I mean it’s — and the mix has been very consistent over time. We’ve also seen with our Stelo users, for example, the type 2 patients who are purchasing Stelo are reordering quite regularly and staying on their subscription patterns and are much more likely to sign up for subscription than they are not to.

So across the board, when we have reimbursement and even just those having the experience who are paying cash, we’re seeing good retention and good utilization in these populations because the information is incredibly valuable.

Jereme Sylvain: Yes, Robbie, I think — and we announced this at your conference. I think kudos to you for having it there. We updated and published really our rates for the covered population there. You’ll see those on our website. That hasn’t changed since the last time we spoke. So the utilization has been and continues to be strong in those covered markets, as Kevin alluded to. When you don’t have coverage, it’s a little bit less. However, we are seeing strong uptake in Stelo, especially in that type 2 user population. So good retention there, just maybe not as much as the covered population.

Operator: Our next question comes from the line of Danielle Antalffy with UBS.

Danielle Antalffy: Just a quick question on the macroeconomic environment and actually less about tariffs and more about the several proposals for the budget and Medicare and will we or won’t we go into a recession? That’s a big question. I would love, Kevin, how exposed or unexposed or protected you guys think you are if, in fact, we go into a recession and maybe give some commentary around that COVID sort of the last time, but that was very unique. So just curious what you would say there.

Jereme Sylvain: Yes. I can start with that, Danielle. This is a question. We’ve done a full analysis on this in the past just to see what our exposure is to coverage levels, both from coverage, employment and then also individual circumstances. And I would say that by leaning into coverage the way we have and certainly making CGM a core part of someone’s care pattern, but also the cost we save the systems and demonstrated time and time again, while everybody is impacted in economic upturns and downturns, I think we would hold out pretty darn well. While we’re not in a position to release that analysis, I think as we were going through as a management team and really as a Board, as they looked at it, I think we left feeling we’ll be strongly positioned, at least relative to other companies in the space in a downturn.

So we’re excited. But we’re happy about the position we’re in the event that, takes place to weather quite well. Kevin, don’t know if you have any broader…

Kevin Sayer: No, I’ll just reiterate what Jereme said. We’re one of the few medical products, prescription drugs or medical devices that provides tremendous information and also saves cost to the system. So we believe we hold up very well. All of our analyses support that, and we believe we can demonstrate that quite well as we did when we got Medicare coverage many years ago as we brought all the Medicaid plans along as we move to basal. We’ve been able to demonstrate our value time and time again, and we believe we can continue to do so.

Operator: Your next question comes from the line of Jeff Johnson with Baird.

Jeff Johnson: Congrats on the quarter. Jereme, maybe it’s a question for you since it’s on gross margin, but wondering if you could help us kind of with the gating. You gave a good amount of information there, I understand. But it seems like to me, as I’m doing kind of back of the envelope, we should still be kind of in that very low 60% range, maybe even upper 50s for the second quarter and then you get to the mid-60s in the back half. Is that still kind of the range that we should be thinking about for the setup throughout the year on growth? And then kind of a corollary to that, it’s not where I get my primary research, I promise you, but some of the chat boards and things like that are still showing some kind of scary pictures of maybe some manufacturing issues on sensors, things like that.

Where are you at now? You’re talking about having to charter some of these flights and all that. But on the manufacturing process itself, you settled and comfortable that things coming off the line are in good shape, and this is really just about getting channel inventory back up to normalized levels or at least your own inventory levels back up to normalized levels now. It’s not — we’re not still in the phase of having to fix some sort of manufacturing issues.

Jereme Sylvain: Yes. Maybe I can start on the kind of the cadence question, and I can turn it over to Jake, who’s here. My answer very simply is, Jeff, you’re really good at math, and I can’t argue with your math. So all done. And so — and then in terms of the product and in the process. Let me turn it over to Jake in terms of how we’re thinking about that.

Jacob Leach: Sure. Yes. Thanks for the question, Jeff. So yes, as we have a pretty robust warranty program around sensors and sensor issues do happen, and we’ve seen them on the boards, too. We have no — there’s no difference in frequency of those from last year to this year. We’ve actually made some improvements in quite a few of them. So we’re very comfortable with the product that’s flowing off the lines. We are working very hard to rebuild our internal inventories. And so our lines as we exited the quarter, we’re running at some record output. But that being said, we have significant amount of testing and quality controls. We feel very comfortable about that product. So there’s no inherent manufacturing issue to fix. What we’re really focused on through all this expediting is just making sure we’ve got product where it needs to be so that we have continuity of care for both current customers and also being able to supply product to those new customers.

That’s a lot of what played out in this first quarter.

Operator: Your next question comes from the line of Jayson Bedford with Raymond James.

Jayson Bedford: Congratulations on the progress here. Just internationally, you mentioned pockets of strength relative to consensus, international revenue was a bit below where folks were looking for. So is there anything notable to call out? And maybe more specifically, was international impacted more by the supply dynamics?

Jereme Sylvain: Yes. Thanks for the question. I think the pockets of strength alluded to a little bit in the script, it was really more the France and Japan. Japan obviously coming off of going direct there in France with Dexcom ONE coverage for basal in the region. So those are the pockets of strength. You do see some choppiness, quite frankly, in the international business. You saw a little bit of it last year, Jayson, as coverage wins come in and come out and — I shouldn’t say come out, but come in, and the timing of when they start. There were obviously some coverage wins we expected to take place here in the first quarter. Some of those slide a little bit. Some of them slide forward at times as well. And so what I would say is the underlying volume demand was strong, especially in the markets we’re in.

Some of the markets where we had some wins were in Dexcom ONE. We mentioned France being one of those Dexcom ONE wins. We do expect wins across the board in the G Series and in Dexcom ONE as we open up new markets over the course of the year. But there will be some choppiness there. Underlying patient demand, underlying unit volume growth, still very, very solid. But we’ll have to keep you guys apprised of some of the progress we make on some of the wins to help you guys model it over the course of the year, but still a solid business, still solid underlying growth. We’ll still expect it to be a contributor meaningfully over the course of the year.

Operator: Your next question comes from the line of Travis Steed with Bank of America Merrill Lynch.

Travis Steed: Congrats on a good quarter. I wanted to ask about the 50 basis points of inflation that you kind of built in with supply chain, if that’s kind of directly related to tariffs. And I’m curious about the use of some exemptions out there like the Nairobi [ph] exemption and if that’s applicable to you and kind of what you’ve assumed around that going forward?

Jereme Sylvain: Yes. So happy to answer that question. I think, first off, we have a large manufacturing presence in the United States. And I think we’re really proud of both our manufacturing in Mesa and all the capabilities we’ve built here, both in San Diego and Mesa to help. So we make a lot of product in the U.S. And so we have a lesser exposure there to tariffs from that perspective. Our industry does have various — our industry has historically had exemptions out there. And so we’ve certainly leaned into those. And so we don’t necessarily expect any material impact from direct tariffs. And I think that’s — we’re comfortable with that position. We are seeing for raw materials and things that come out of the — that come into various networks.

There are some conversations around pressures there. And certainly, as we look to negotiate prices down in economies of scale, they do come up. And so as we looked out over the course of the year and looked at renewing contracts and looked at those indirect impacts, so not necessarily us importing it, but the raw materials that ultimately make up some of the components. We have estimated there could be an impact of around $20-ish million over the course of the year. It’s about 50 bps. That’s really what we’re alluding to. Our goal is to navigate our way out of there and certainly try to find ways to get around it. Certainly, if there’s tariff reform and ultimately, they go away, that will be helpful on the year. But we thought it was the right answer to keep an eye on that.

We’ve seen it come through. That’s what we estimate the impact on the year. It would not be on our end product, Travis, that we have not assumed anything from that perspective.

Operator: Your next question comes from the line of Matt O’Brien with Piper Sandler.

Matt O’Brien: Maybe just sticking with the 15 Day for a second. I don’t know exactly who this question is for, but can you just talk a little bit about the rollout of that product as far as integrating into the pumps, et cetera? And how do we think about not necessarily this year, but in some of the out years, the contribution on gross margins? Can it be a couple of hundred basis points in a year in terms of gross margin benefit? Or will it be more measured than something like that?

Jacob Leach: Matt, this is Jake. Happy to take that question. Yes, we were incredibly excited to receive the approval for 15 Day. And we’ve got the internal team is very focused on getting this product launched. And so we — as you mentioned, one of the things we’re doing to ready ourselves for launch is working with all of our pump partners to ensure there’s compatibility for the extended 15 Day duration with the extra grace period on top of that. So it’s really just a process of making sure that all the displays, everything they show in their FAQs, everything is all lined up to be able to support a 15 Day. That is going well. Our goal is to have compatibility at launch. That’s always been our goal. So we’re working towards that.

We’re also working on securing coverage for this product now that it’s approved to make sure that it’s a seamless transition for folks when they want to upgrade to this 15 Day product. It does require a new prescription to get the 15 Day. So that does — there’s a process that folks go through in terms of utilizing their sensors. They have to see their health care provider to get the prescription, but very excited to get it out there. And obviously, it does have an impact on margins and improvement there. I don’t think we’re going to give much guidance for beyond our — this year. We’re really focused on this year. But I don’t know, Jereme, if you have anything to add?

Jereme Sylvain: Yes. I would just say, while we’re not necessarily giving numbers, I think your question is more, does it snap overnight? Or is it more measured? And I think the answer is it’s more measured. And the reason is, obviously, as Jake alluded to, new scripts, but we still have folks on G6, right? It just takes time for folks to get to see their physicians to make the change to get comfortable with it. So our goal will be to move people quickly, and we hope to outperform measured. But as you’re thinking about it, I would start with measured from a modeling perspective. I think that’s the right way to go about it.

Operator: Your next question comes from the line of Marie Thibault from BTIG.

Marie Thibault: Nice to see a very strong quarter. I wanted to ask here about the OpEx control that’s being sort of assumed in the guidance, especially with some of the impacts to gross margin, but you’re able to hold the operating and EBITDA guide. Just wanted to understand sort of where some of those puts and takes are and how you’re able to accomplish that.

Jereme Sylvain: Yes. Why don’t — I’ll start with that. And I think Jake is kind of leading a lot of these. But — so I think when we looked at the investments we’ve made, and certainly, we put a lot of levers into the business over the years, we’ve looked at the areas where we can continue to invest in things that are really, really important. And we talked about some of the work we’re doing around our next-generation sensor and obviously, some investment in Stelo and the various software features. So we’re really focused on advancing those and advancing and expanding our commercial organization. But remember, we’ve made the investment in our commercial organization last year in expanding the sales force. So now we can lever that.

We’ve talked about leaning into AI and levering that and robotics and levering that throughout our business. We’ve looked at location strategies, and we’re leaning into levering that. There’s been a lot of things we’ve done that allow us to have these levers. And so this is a year we can use those levers, but we are still investing in the business. That’s the interesting at the end of it. When you look at the total year, if you kind of back into it, you’re going to see well over $100 million of investment in OpEx even with that. So it’s still a heavy investment into the business, just pulling all those levers that we’ve put in place. Jake, I don’t know, a lot of these are kind of driven by you and your teams.

Jacob Leach: Yes, yes, certainly. I think the main message is we’re just becoming more efficient in many of the things that we do. It’s been a program that we’ve been focused on for a number of years. One of the places in particular is our software teams. They’re doing incredible work using some of the newer technologies to be able to put out more software with a similar amount of resources. While we’re still making investments in R&D and our next-generation technology, we’ve done a nice job of trying to ensure that we’re not — we’re making enough investment there, and we’ve got that program on track. So I think it’s about efficiencies that we’ve been building over time, and we are able to take advantage of some of those this year.

Operator: Your next question comes from the line of Joanne Wuensch with Citibank.

Joanne Wuensch: Nice quarter. Let me just pause on the FDA warning letter. It didn’t stop you from getting the 15 Day sensor approved. I don’t anticipate that it will stop you from getting a hospital label, but is there anything that it does stop you from doing? And how do we think about timing and steps towards resolution?

Jacob Leach: Yes, this is Jake. Great question. So yes, so we are basically working to implement a number of process controls. We already did quite a bit after the FDA came in and audited. So you’re absolutely correct. The warning letter doesn’t restrict submissions and approvals of new technologies, devices and/or it doesn’t restrict distribution at all. Just basically, there’s a number of things we have to continue to work with the FDA to ensure we address all their concerns. So it’s a big focus for us. And so we’ve got a number of dedicated resources ensuring that, that is done, but it doesn’t restrict us at all. And it’s hard to speculate on exactly when we’ll close it out, but we are making great progress. We give the FDA regular updates on our progress to what we’ve committed within our responses.

And so it will be a process, but it doesn’t restrict us. And the resources that we focused to address the warning letter are not — we’ve predicted our innovation pipeline that’s been very important for us. We’ve used resources to work on some of our other projects to really focus on the warning letter response and the implementation of what needs to happen there.

Operator: Your next question comes from the line of Michael Polark with Wolfe Research.

Michael Polark: RFK Jr. recently said in an interview that he thinks glucose monitors are extraordinarily effective and only cost $80 a month. So it’s a clear positive read from the Head of HHS, and there’s not many things on the right side of his ledger right now. And so my question is, can you remind us on what is the path with Medicare fee-for-service program for broadening the coverage decision to the non-insulin using type 2 population? Does this change in leadership raise the odds in your view? And I know the RCT is critical for this as well. Can you remind us on what’s kind of timing of disclosure for the type 2 NIT RCT?

Kevin Sayer: So I’ll take a stab at that one. First of all, we’re very pleased with the comments of the administration. It hasn’t just been RFK Jr. There have been others who made comments about CGM being a great tool for health, and we’re thrilled with that because we think it can be, and we are learning more and more every day even from our Stelo users, those without diabetes, what they can learn and what they can do to improve their metabolic health and the type 2 users as well. With respect to type 2 approval and CMS approval, we’ve talked about working with CMS directly and submitting a request for approval for those not on insulin, and we’re waiting to hear from them and continuing to gather evidence that would support that.

So through normal channels, there would be a CMS approval based on evidence. That takes time, and we go through that. Now with this administration, who knows what will happen time-wise. We’d be thrilled if we got that approval very quickly. we’re working every — learning everything we can like everybody else. We think we fit the Make America Healthy agenda very nicely with what our products can do, and we’ll continue to work and push for that.

Jacob Leach: Yes. I think we love the recognition that CGM is a tool that can help people both manage their condition, but also reduce health care costs. And I think you’re seeing that recognition certainly from RFK, from others as well as the third PBM coming on to cover CGM and NIT. I think that it’s evidence that the message is getting out there that CGM is the right tool for this. Your question around RCT. So we do anticipate finishing up enrollment in the first half of this year. And so the trial is on track. And we do expect the initial readout from the trial late this year, but probably more likely early next year is when we’ll get some of that data. But based on the real-world evidence that we’re seeing coming from our users that are using G7 and Stelo, that NIT population, we’re seeing great outcomes there.

And we do expect at the upcoming ADA meeting to see some more data there around outcomes in NIT. So I think the evidence continues to build. And so we’re excited — we’ll be excited to give you guys that readout when the time comes.

Operator: Your next question comes from the line of Margaret Andrew with William Blair.

Margaret Kaczor: I wanted to follow up on the commentary you guys talked about on non-insulin using type 2s. You’re saying I think new customer starts that are higher than ever before. I guess, can you give us a sense of scale here? Is it doubling, for example? Or can you at least call it material to overall new patient adds in the period? And it doesn’t sound like you’re assuming this accelerated pace continues in guidance given that you’re reiterating sales. So I guess, one, is that right? And two, why not? Are there offsetting factors to that? Or you just want to get ahead of yourselves?

Jereme Sylvain: Yes. I can certainly take that one. And what I would say is historically, and you know us well, coverage was always a big approach about how we went about getting folks access to the product. And this quarter, we launched, obviously, with both — 2 of the 3 PBMs with coverage, and I think that really helped. And so when you think about new patient adds, they are starting to become a material portion of those new patient adds. And I think that’s what we would expect over time as more and more coverage opens up, knowing full well that this population is a much larger population than any of the coverages that have opened up in the past. So I would expect to continue to see more of that. And as we get the third PBM, as we mentioned, with that coverage coming on in the back half of the year, I would expect that as well.

So those are all certainly good signals and all contributed to a record new patient quarter. To your question then on we’re assuming that things go backward. That’s not necessarily the case. I think the answer is it’s 1 quarter, and we have — we’ve guided for a full year. I think the answer is let’s see how things play out over the course of this quarter. And certainly, that will help us give a little bit more color. It doesn’t change our bullishness on the business. It doesn’t change our expectations that we have a very solid year this year. But I think it’s too early in the year to start revising upward guidance. We want to make sure we deliver against our promises, and that’s what we’re looking to do.

Operator: Your next question comes from the line of Mike Kratky with Leerink Partners.

Mike Kratky: Maybe just a quick follow-up to that last one. But alongside the acceleration that you’re seeing in that type 2 non-insulin patient population, are you seeing anything on the type 1 side of the world, whether it’s market growth and penetration or just your overall market share that might be a little bit different than your expectations coming into the year?

Kevin Sayer: This is Kevin. I’ll take that. Our market share expectations are exactly where they thought they would be. We do incredibly well in the type 1 market, and we continue to do so. We also continue to add type 1 patients internationally and in the U.S. every quarter, and we saw nice growth in our type 1 business this quarter, right along the lines of what we anticipated. So we’re doing very well in new patients in type 1. And as always, our retention utilization in that population is outstanding. It is an absolutely essential tool for managing type 1 diabetes.

Operator: Your next question comes from the line of Matthew Blackman from Stifel.

Colin Clark: This is Colin on for Matt. I want to take a moment to ask about the sales force and in particular, what you’re seeing on the ground with basal adoption now and in the DME channel. Any specific commentary on that opportunity and how penetration is ramping since we got a last update? And also how your share position is trending would be really helpful.

Jereme Sylvain: Sure. Yes. This is Jereme. I think the sales force continues to ramp up and do well. We kind of look back on record new patients, and that’s, again, in the first quarter, which typically isn’t always our strongest quarter from a new patient perspective. So it’s great to see that in Q1. And by the way, that’s not a record Q1. That’s a record for any quarter. And so that’s lovely to see. In terms of how we do that, well, you do that by penetrating type 2 non-insulin users. That’s certainly the case. You do it by penetrating basal deeper and deeper. And you do it by continuing to win where we’ve historically won in the intensive insulin space. And you’ve really seen that across the board. And so it was — again, it was a really, really good quarter from us from that perspective.

In terms of then channel, you looked at where we’re playing and then how the channels work, I think we had a — we talked about where we sat in the DME channel. And first off, I think we’d want to say thank you to all the DME partners who’ve done a wonderful job working with us through the course of the quarter. They went through the supply journey with us and worked well with us, and we believe we work well with them. We’ve talked about our share stabilizing in the fourth quarter, and our expectation is having stable share as we move through the course of 2025, and that’s exactly where we are. We’ve stabilized that share. We think we’re in a good, stable position with our DME partners. I appreciate their partnership through it. And we’ll work through the rest of the year to see if we can even do better than that.

But that’s where we sit today. So it’s good progress. Our sales force continues to ramp and continues to do better every quarter, and it’s exciting to see.

Operator: Your next question comes from the line of Issie Kirby with Redburn Atlantic.

Issie Kirby: I just wanted to follow up on the non-insulin using type 2s again and the extent to which you’re seeing potentially any of these patients coming from competitive switching versus if they are new to the sensor? And then just on Stelo, sorry if I missed this, are you giving Stelo revenue again this quarter? And then just on Stelo, how are you sort of capturing potentially now that reimbursement is improved for G series, how are you capturing or encouraging people to upgrade from Stelo to the G7.

Kevin Sayer: Yes, I’ll start with that one. With respect to our type 2 non-intensive or non-insulin patients, most of those are new patients and new to DexCom CGM, particularly as we’ve expanded coverage, and we do have the best coverage amongst the PBMs of any of our competitors out there. We’re doing very well, getting new adds on those non-insulin users. With respect to Stelo revenues, Jereme, I’ll let you go ahead and talk about that guide.

Jereme Sylvain: Sure. Yes. And Issie, thanks for staying late with us. Yes. So I think Stelo, the answer is we talked about it being 2% to 3% of growth on the full year, and we are right in line with that. So we’re continuing to do well. While we haven’t necessarily broken out revenue by quarter, we will give you the growth contributions over the year, and we’re tracking right to that 2% to 3%, so right in line.

Operator: Your next question comes from the line of Bill Plovanic with Canaccord.

Bill Plovanic: Just on the 15 Day, as you walk through the contracting for this, you’re reimbursed on a per diem. Some of the knock has been you’re a little more expensive than some of your competitors when it comes to the payers. Is that something that will be adjusted in this 15 Day as you’re working through those contracts? And if so, so does the price per day come down a little as you kind of do this? How should we think about that?

Jacob Leach: So as you mentioned, Bill, CGM is reimbursed as a unit, so per day or per quarter per month. So basically, we do anticipate that, that reimbursement will remain the same as we launch 15 Day. So same revenue for a period of time.

Operator: Your next question comes from the line of Chris Pasquale with Nephron.

Chris Pasquale: Congrats on the quarter. Two quick follow-ups. Just I know you don’t want to give a Stelo revenue number, but I would love it if you could give us an update on where the installed base stands today relative to the more than 140,000 users you had in mid-January. And then, Jereme, could you just go back to the 100 basis point impact you’re assuming from increased freight and other things. If channel inventory is already back to normal levels, why that magnitude of impact still in front of you relative to the 75 basis points you took in 1Q?

Jereme Sylvain: Yes, happy to cover that. In terms of Stelo users, I can say there is some information out there that is public, and I think I can point to it, it’s well over 200,000 downloads at this point. So we’re continuing to make good progress over and adding more and more net new patients every quarter. So I think that should give you some context. It continues to do well. We continue to see more and more folks download it, use it. And we’ll be able to give you more and more retention utilization as we get under our belt. We know there’s going to be more intermittent usage. But the good news is because they’re all on the app, we’ll keep tracking those. So there’ll be a point in time where I think we can maybe ground folks again on users, but well over 200,000 downloads, which means well over 2,000 people, 200,000 times someone’s connected Stelo.

So certainly great progress there. In terms of why the freight, and I’m happy to answer that one. So the answer is, as we exited the second — the first quarter getting supply levels down to normal, but we had almost no inventory on the shelves at that point. And so as we go through and want to make sure we have enough inventory on the shelves to help impact supply in the channel, we have to do that. That’s obviously a challenge when every week, every month, you’re looking through and trying to navigate through really, really low inventory levels as orders come in. So our goal is to have really as a corporation 90 days of finished goods, but at least 60 days of finished goods on the shelf. That allows us to navigate through the channel. And so we’re going to keep expediting freight until we get to that level.

I think it’s really important because that allows us to make sure that as you have pharmacies, et cetera, maybe running out of supply, we have enough in there to help navigate that channel. So you’re going to see us continue to do that over the second quarter as we ultimately navigate it through and to a similar clip that you saw really in the first quarter. As we start to put more and more inventory on the shelves, that helps us slow it down. We can’t stop, but it helps slow us down. So we talked about in our commentary out of the gate, it will moderate over the course of the year. So you’ll still see it play through the second quarter. Likely into the third quarter, hopefully not, but we’re going to have to work real hard to do that. That’s why we’ve included in the guide, though.

Those are expensive freight, those ships. I mean, normally, what you would do is you might put it on ocean freight or you might put it on general commercial carriers. We’re actually chartering flights specifically. So it’s an expensive form of freight, and that’s why it impacts us the way it does on the year.

Operator: Your next question comes from the line of Steve Lichtman with Oppenheimer & Co.

Steve Lichtman: With more pieces in place on the non-insulin front, you mentioned, Kevin, driving awareness. Can you talk about what the forms of that — what that might look like? Is it solely direct-to-patient work? Is it educating PCPs with the expanded sales force? Any color there would be great.

Kevin Sayer: It’s across the board for us. Certainly, we’ll have more direct-to-consumer advertising and more focused on that type 2 population and those non-insulin using patients to show what they can do with that. But there’s a great educational effort that really has to go on in the physician’s office as well. We need to make sure that they know that these patients can get a prescription for a Dexcom. I mean if you go back a few years, if they wrote a prescription for a Dexcom for a non-insulin user and send them to the drugstore, they were told they could have it for list price. Now they can go to the drug store with many of these plans, there’s 0 co-pay. So we’re creating a much better experience for the physician in addition to the end user.

And we need to educate that because they may have had an experience in the past where it didn’t go that well and didn’t go the way they wanted to. Those experiences are going much, much better now. And so it’s educational across the board. It’s not just one customer. It’s all of them.

Operator: Your next question comes from the line of Matt Miksic with Barclays.

Matt Miksic: I want to maybe — we covered a lot here, but maybe a follow-up on Stelo. Last year, I think ahead of some of the coverage that you talked about earlier in the year, there was maybe — it seemed to have maybe a slightly different role, slightly different target potential maybe — and then now it’s still important. But as you’ve talked about, Dexcom G7 is with coverage slotting into some of these non-insulin opportunities. So can you talk about how to think about the 2 products and where they — how they overlay or fit together?

Kevin Sayer: Yes. One of the things we’re most excited about with Stelo is the opportunity it presented our sales force because as they walk into a primary care office now, they have 2 options to present a physician. If we don’t, by chance, have coverage for a patient now, that physician can now offer Stelo to that patient and again, learn about the glucose behavior and value to that customer. The other thing that we are learning as coverage expands, utilization and retention and everything are always much better when there’s reimbursement rather than paying cash. And one of the other things we have to consider with respect to the Stelo and G7 crossing of the roads, we’re probably going to have to move some of the Stelo features into the G7 app. And Jake and team are working on that. I’ll let you go for a minute. Jake. Go ahead.

Jacob Leach: Yes, sure. So I think part of that question was around how Stelo started when we first launched it. And over time, first, we were focused on people with type 2 diabetes that didn’t have coverage, right, as well as prediabetes. And as we’ve continued to innovate on the product and as we’re building up the pipeline of features that we’re going to bring, we are continuing to enhance its capabilities for those with diabetes, but also those that don’t have diabetes. We’ve got our integration with Oura that we’re very focused on for users, and we do anticipate that’s going to bring some more folks in the Stelo family that aren’t — don’t have diabetes. So we are focused on expanding Stelo’s use cases well beyond diabetes and prediabetes.

Operator: Your next question comes from the line of Anthony Petrone with Mizuho Group.

Anthony Petrone: I’ll stick on Stelo. A question on the utilization intensity with a prediabetic versus a nondiabetic patient. Do you have any data on that? Are you noticing more utilization intensity with prediabetics? And then just on channel access, where are most folks getting Stelo today? And when you think about Amazon, how much could that sort of just open the opportunity for Stelo?

Jereme Sylvain: Sure. Yes, happy to answer that question. The way to think about utilization patterns, at least the way that we’ve seen it today is — and folks have to — when they opt into using Stelo, it’s how you opt in, right? You can choose diabetes, prediabetes, I don’t have diabetes. The way it works is for those that opt in and say, call it type 2, they would be the highest utilization, pre-diabetes kind of in the middle and then I don’t have diabetes the lowest. And so as you’re trying to think through which populations adopt, that’s the retention/utilization — I’m sorry, utilization rates you ultimately see. I think over time, and Jake alluded to a bunch of features going into Stelo that are really targeted really for everybody, but start to really engage the health and wellness population, there’s an opportunity to drive that up over time.

And so we’re really excited. But out of the gate, when we launched Stelo, I think we talked about it and Matt alluded to it a little bit earlier, it really started as a type 2 product, and we’re pushing down the acuity curve — we’re pushing down the acuity curve there. So we’ll have more as time moves on. But for right now, that’s at least the sequencing in terms of utilization. That’s how I think about it from a model perspective. In terms of channel, it’s still predominantly stelo.com. Amazon is relatively new for us. It’s really been about a month or so since it’s been on Amazon live and great uptake. We’re really excited to see it. It’s going to be — so at least for the first quarter, it’s predominantly stelo.com. The good news, though, is obviously, Amazon is everywhere.

It’s ubiquitous. And so as you have folks thinking about product, how do I get it, where do I go? We know that Amazon is going to be a great partner for how we disseminate the product through the population. So couldn’t be more excited about how Amazon can help broaden our reach. And so I would expect over the balance of the year, Amazon to become a much larger part of our distribution. We’ll have to give you guys updates as the quarter moves on as to how it shifts from stelo.com to Amazon.com. But as of right now, majority stelo.com, and we’ll have to give you guys updates on Amazon progress.

Operator: We have no further questions at this time. I will now turn the call back over to Kevin Sayer for closing remarks.

Kevin Sayer: We want to thank everybody for participating today. This is another great quarter for DexCom. The new patient growth and the revenue growth were phenomenal. More importantly, there’s a lot of people at our company we need to thank today because there was a lot of effort on the supply side, on our sales side, our trade teams. Everybody did a great job. So thanks, everybody, and have a great day.

Operator: Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.