DexCom, Inc. (NASDAQ:DXCM) Q3 2025 Earnings Call Transcript

DexCom, Inc. (NASDAQ:DXCM) Q3 2025 Earnings Call Transcript October 30, 2025

DexCom, Inc. beats earnings expectations. Reported EPS is $0.61, expectations were $0.57.

Operator: Ladies and gentlemen, welcome to the DexCom Third Quarter 2025 Earnings Release Conference Call. My name is Abby, 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. You may begin.

Sean Christensen: Thank you, operator, and welcome to DexCom’s Third Quarter 2025 Earnings Call. Our agenda begins with Jake Leach, DexCom’s President and Interim 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 that time, we ask analysts to limit themselves to 1 question each so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our third 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 third quarter earnings call for a reconciliation of these measures to their most directly comparable GAAP financial measure.

Now I will turn it over to Jake.

Jacob Leach: Thank you, Sean, and thank you, everyone, for joining us. Before we begin, I’d like to take a moment to recognize Kevin Sayer, who is not on the call today, and as many of you know, has taken a temporary medical leave. Kevin, I know you’re listening today, and I look forward to catching up with you after the call. Now on to the quarter. Today, we reported third quarter organic revenue growth of 20% compared to the third quarter of 2024. We continue to benefit from category growth, recent CGM access expansion and solid share performance in both our U.S. and international businesses. In the U.S., we again saw more of our new customer starts coming from the entire type 2 population as we benefited from the growing type 2 coverage and expanded reach within primary care.

As a reminder, we now have coverage established for anyone with diabetes with the national formularies of 3 of the largest commercial PBMs. This includes active coverage for nearly 6 million type 2 non-insulin lives, which represents about half of the type 2 NIT commercial population in the U.S. Of course, the journey is not done, and we will continue to work tirelessly until we have coverage for this entire population of more than 25 million Americans. What continues to give us confidence is the growing body of CGM outcomes evidence for this population. This leads us to believe that this access expansion is a matter of when, not if. Given the significant level of CGM usage that already exists among this cohort, we have more real-world evidence available today than we have ever had in any of our prior advocacy campaigns.

We already have seen positive updates to the latest standards of care for this group, which we expect to be further strengthened as randomized controlled trial data continues to emerge. This summer, we saw the first wave of non-insulin RCT outcomes presented at the annual ADA conference, and we are now working to build on that with our own well-designed RCT. We built our trial to be representative of the wide spectrum of people with type 2 diabetes and look forward to providing a readout early next year. Similar to our MOBILE and DIaMonD Studies, we believe this data set can become the cornerstone of our ongoing type 2 evidence road map. This not only helps us advocate for the remaining type 2 lives in the U.S., but it also helps us as we push for greater type 2 coverage across the globe.

As our customer base becomes increasingly diversified with this broader coverage, we have also continued to iterate our product experience to make it more personalized for each of our users. One example that I’m particularly excited about is a new feature called DexCom Smart Basal. As we continue to learn more about the type 2 customers on basal insulin and their health care providers, we’ve observed several trends. First, there is apprehension to start basal insulin for those who truly need it. More than 1 in 3 patients avoid basal insulin altogether because of the fear of hypoglycemia. For those who are on basal insulin, about half of the customers who ultimately progress to mealtime insulin never reach an optimal dose of basal insulin. And for those that do, it typically takes several months to find the right dose.

We have an opportunity to make this experience so much better for our customers. DexCom Smart Basal is a titration module built within the DexCom app that is designed to make basal insulin titration and management simpler, faster and personalized for our customers. Our algorithm team designed this new software to learn from the daily glucose patterns of customers and better identify the ideal timing and dose of their basal insulin. With Smart Basal, we also expect to improve adherence and greatly reduce the required workflow for the prescribing community as titration has historically required ongoing manual inputs and frequent office visits. DexCom Smart Basal is currently under review with the FDA and for CE Mark. Once available, this feature will further advance our value proposition amongst the type 2 basal population and for the physicians that treat them.

We also continue to enhance the value proposition of Stelo with ongoing software updates, broader distribution and new metabolic health partners. I’m very proud of how far Stelo has come in such a short period of time. In just the first 12 months in the market, Stelo has surpassed $100 million in revenue and has increased awareness of what CGM can do for everyone to improve metabolic health. We are continuously making the app more personalized and engaging. We simplified ordering and reordering and our growing base of partners has enabled broader health insights for our customers. And this is just the beginning. We’ll continue to make this feel like more of a consumer experience over time. We’ve also been getting a lot of inbound interest recently in bringing Stelo to the international market and look forward to these extensions in relatively short order.

In addition, everyone at DexCom is very excited for the broader launch of our G7 15-day system. Over the past few months, our team has done an incredible job securing reimbursement for this product at the same net price to DexCom and low out-of-pocket cost for our customers. In fact, we now have contracts finalized with Medicare, every major commercial payer and our commercial DME partners. By finalizing these contracts, we’ve cleared a key step to enable our broad-based launch. As we’ve previously mentioned, we’re currently in our initial launch with our Warrior community as we gather feedback for our broader launch. We are looking forward to our broader rollout in the coming weeks. As we expand this launch, we are also continuing to innovate on the entire customer service experience.

We recently introduced a completely new digital experience called My DexCom Account, which is rolling out country by country as we speak. My DexCom Account is a new online account portal that streamlines and simplifies the DexCom digital experience. Built on direct customer feedback, this new platform will allow instant connectivity for online support, real-time visibility into orders or open tickets and active tracking for sensors. It will also greatly simplify service requests for our customers as the site can autofill necessary user information, including the serial number of a sensor that may require service. Between updates like this, our new pharmacy replacement model, ongoing software investment and our continued focus on product performance, we are demonstrating our commitment to advancing the customer experience.

And this is just as true today despite some of the media that has been circulating on this topic. So let me make one thing clear. The customer is and will always be the North Star for this company. This is what drives us every single day, and it’s what’s also driven me here at DexCom for over 20 years. That will not change. I recognize the investment community is attempting to interpret data on this topic. As we recently shared, our complaint rates for G7 have been largely stable over the past couple of years, and this continues to be the case across important categories, including sensor performance. But I also want to speak to our loyal customers and prescribing community today. If any of you have an experience with DexCom that does not meet your expectations, we understand and that is not good enough for us.

We’re always listening and we’re always making improvements as a result. For G7, this has included improvements in Bluetooth connectivity, improvements to the adhesive and most recently, addressing deployment challenges that we identified earlier this year. Through this ongoing work, our product continues to get better. Status quo has not and will never be our guiding light. I’m confident to say that the quality of the sensors coming off our lines today is exceptional and meets our high standards and the expectations of our customers. To close, I just want to note that I am honored and excited to be serving as DexCom’s next CEO. During the fall conference circuit, I had the opportunity to lay out my initial vision as the next CEO and share my conviction in this business over the long term.

I look forward to sharing even more over the coming months. Our future remains very bright. Our team is incredibly strong, and the opportunity ahead of us to transform metabolic health is unlike that at any company I can think of. With that, I’ll turn it over to Jereme for a financial update.

Jereme Sylvain: Thank you, Jake. As a reminder, unless otherwise noted, the financial metrics 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 third quarter of 2025, we reported worldwide revenue of $1.21 billion compared to $994 million for the third quarter of 2024, representing growth of 22% on a reported basis and 20% 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 $852 million for the third quarter compared to $702 million in the third quarter of 2024, representing an increase of 21%.

As Jake mentioned, we continue to see all areas of type 2 diabetes become a bigger contributor to our U.S. new starts given our broader presence within primary care, significant new coverage within the non-insulin market and the continued growth of the basal market. We’ll work to further build on this momentum, particularly as we push for even broader coverage for this group. International revenue grew 22%, totaling $357.4 million in the third quarter. International organic revenue growth was 18% for the third quarter. This marked our third straight quarter of accelerating growth internationally with particular strength coming from regions where we have expanded access in recent quarters. For example, France continues to stand out as one of our fastest-growing markets year-to-date.

In fact, our growth in France has accelerated during every quarter of 2025 as we have built off the significant new coverage that we finalized late last year. Canada also performed very well during Q3 as we saw a nice uptick in demand followed quickly behind our new coverage in Ontario. As a reminder, in both of these markets, we now have coverage secured through basal insulin use, and we expect more markets to move this way over time. These are great examples of the type of growth we can deliver as this type 2 coverage emerges. Our third quarter gross profit was $741.3 million or 61.3% of revenue compared to 63.0% of revenue in the third quarter of 2024. During the third quarter, we made continued progress in stabilizing our global sensor supply as we were able to fully restock our level of educational samples in the field and further rebuild our finished goods inventory levels internally.

Given this progress, we were able to taper back our investment in expedited shipping by the end of Q3. In fact, we recently began shipping via ocean freight once again, beginning the transition back to more cost-efficient methods of transportation as we close 2025. While these supply dynamics have progressed in line with our plan, our third quarter gross margin was impacted by scrap rates at our manufacturing facilities that were higher than expected, albeit an improvement from the second quarter. As Jake mentioned, earlier this year, our team identified certain third-party components that were contributing to an uptick in deployment issues for our sensors. While we have since addressed that issue directly, we have chosen to provide extra scrutiny to supplied products to ensure the highest quality product gets into the field, even if this results in higher costs in the near term.

We expect these scrap rates to continue to improve in the coming months. Operating expenses were $468.4 million for Q3 of 2025 compared to $413.9 million in Q3 of 2024. Despite some of the challenges on gross margin, the company has been incredibly focused on managing operating expenses even as we increase our investment in R&D spend. Operating income was $272.9 million or 22.6% of revenue in the third quarter of 2025 compared to $212.0 million or 21.3% of revenue in the same quarter of 2024. Adjusted EBITDA was $368.4 million or 30.5% of revenue for the third quarter compared to $300.1 million or 30.2% of revenue for the third quarter of 2024. Net income for the third quarter was $242.5 million or $0.61 per share. This was the highest quarterly earnings per share in the history of our company.

We remain in great financial position, closing the quarter with greater than $3.3 billion of cash and cash equivalents. We had a very strong free cash flow quarter, which helped us increase our cash and cash equivalents balance by nearly $400 million, even as we repurchased shares over the course of the quarter. This cash level provides us with significant flexibility. And given where our shares are currently priced, we plan to settle our upcoming $1.2 billion of convertible notes in cash. In addition, we plan to remain in the market this quarter, repurchasing additional shares. Even after settlement of this convert, we’ll have plenty of cash on hand to assess ongoing capital allocation opportunities, including additional repurchases. Turning to guidance.

We are raising our revenue guidance to a range of $4.630 billion to $4.650 billion, representing growth of approximately 15% for the year. For margins, we are lowering our 2025 non-GAAP gross profit margin guidance to approximately 61% to reflect the additional scrap dynamics we discussed earlier. For both non-GAAP operating margin and adjusted EBITDA margin, we are now guiding to a range of 20% to 21% and 29% to 30%, respectively, as we expect to offset some of the gross margin pressure through continued OpEx leverage. With that, we can open up the call for Q&A. Sean?

Sean Christensen: Thank you, Jereme. As a reminder, we ask our audience to limit themselves to only 1 question at this time and then reenter the queue if necessary. Operator, please provide the Q&A instructions.

Q&A Session

Operator: [Operator Instructions] And our first question comes from the line of Travis Steed with Bank of America.

Travis Steed: First, I want to send well wishes to Kevin. I hope things are going well. Look forward to having you back. But the question is there’s been a lot of attention on Street ’26 estimates and what your growth might look at — look like in ’26. And just curious if there’s any color you could share with us today as we start to think about our 2026 growth and the modeling at a high level.

Jacob Leach: Yes. Thanks, Travis. While we’re not going to provide specific guidance for ’26, I’m happy to give you a little color on how we think about framing up our guide for ’26. So the way we look at it as we’re building it up for the year, when you start the year, a lot of different variables that can play out throughout the course of operating throughout the year, there’s lot of puts and takes. And so we obviously — that’s why we often frame it based on a range. And so when I think about the current coverage landscape that exists today globally, so those that today have coverage and access to CGM, it certainly unlocks and affords a nice runway of growth for the next couple of years, and certainly in that double-digit range.

But I think as we look at our range, the top end of our range is probably slightly below where the Street is today for our base case. Certainly, there are opportunities for us to outperform should they happen, things like expanded access and our ability to take share based on our innovation pipeline. But from a base case perspective, we really think that the top end of that range probably comes in just under where the Street is.

Operator: And our next question comes from the line of Larry Biegelsen with Wells Fargo.

Gursimran Kaur: This is Simran on for Larry. So I just wanted to maybe start off with the commentary around G7 and G7 performance and the noise during the quarter. It sounds like those issues have been resolved from an engineering standpoint or a manufacturing standpoint. So can you just please confirm that? And then has the noise been disruptive to new starts or prescribing patterns in Q3 at all? And do you expect it to be disruptive in Q4 or 2026?

Jacob Leach: Yes. Thanks, Simran, for the question. So as I mentioned, we feel really good about the quality of the sensors that we’re producing, both from accuracy, reliability and also addressing those deployment challenges that we ran into at the beginning of the year. Our team has learned a tremendous amount about those and been able to really solve them in the factory. So we’re feeling great about the product. I’ve actually been out in the field recently talking to customers, spending quite a bit of time with both prescribers and those using our products and really listening and making sure that we’re addressing all their concerns and understanding what they’re experiencing. And I am hearing from all of them that things have improved since those deployment challenges we experienced in the front half of the year. So we feel really good about where we’re headed.

Jereme Sylvain: Yes. And then to your question on potential impact on patients in the field, around the fringes, we have heard questions out there. And so those are things we’re out addressing, as Jacob mentioned, getting out into the field and making sure folks understand what happened. And the reality is we see that the complaint rates, while they’re consistent with where they’ve been in the past, we know those types of complaints are the frustrating ones. So there’s likely been a bit of an impact on new starts here over the course of the third quarter. The good news is we’re still hundreds of thousands of new customer starts in the U.S. and certainly strong outside the U.S. as well. So while the quarter was impacted by slightly below a record, still really strong performance over the course of this quarter and really proud of that.

I’m really excited about what happens now as we’ve addressed any of these concerns out there. We’re really excited to see how this impact along with our sales force, along with some of the educational samples that are available, along with supply being in a good position, that will impact us here in the fourth quarter and beyond.

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

Robert Marcus: I wanted to ask, as you look at the new patients, where are you seeing the most growth? Is it kind of slowing down in type 1 and type 2 intensive and getting most from basal and nonintensive? And do you need to do anything differently out in the market and whether it’s advertising or the field force to keep driving uptake of these increasingly new and important patient groups?

Jereme Sylvain: Sure, Robbie. Yes, this is Jereme. I can answer that. I think where we see the growth, we still see strong performance really across all the type 2 markets. That includes intensive as well. So we’ve seen a lot of new patients coming in type 2 intensive basal and certainly in non-insulin as coverage is out there. We still see a decent amount of type 1 patients. But of course, as you know, type 1 is most penetrated and smallest population. So naturally, as we get bigger and more coverage, you’re going to see that. To your question then how do we go to market and where do we go, you’re 100% right. I mean our teams are constantly looking at where we call, who we call on, which channels we market in and where folks go.

And so we do think about it a little bit differently. I often compare it to shaking a tree, right? Sometimes you shake a tree, you got to move to the next tree to shake it. And so we are doing those kinds of things as we look at where the opportunities are. So well taken, something I know the internal team has been looking at and we’ll continue to look at is making sure that we continue to drive the growth and find the patients. I mean when you look at how much coverage is out there, there are many more people with coverage than there are people that are already using CGM. So there’s a lot of opportunity out there to go get.

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

Danielle Antalffy: Jake, I just wanted to follow up on Travis’ question, and thanks for the color you gave in the framing. I guess I just want to clarify one point, and that is, so it sounds like that is assuming no expanded coverage. I mean how — what are your latest thoughts on potential for expanded coverage in 2026? And I guess the bigger question is, will you guide according to your thoughts on expanded coverage? Or will you only reflect guidance based on coverage today? And I’ll leave it at that.

Jacob Leach: Yes. Thanks, Danielle. Yes, to be clear, when we think about a base case for next year’s guide, it includes the coverage that we have today, what the landscape looks like, both across insulin use and noninsulin use and then as we look globally. So that’s really how we’re going to think about our base case guide for the year.

Jereme Sylvain: Yes. And as we move through the course of the year, we’ll make sure we point out the wins that are significant, right? There’s always little wins here and there, but the wins that are significant. And Danielle, you know there’s some potential big wins out there, both across non-insulin, basal and even really — even as you get into some more emerging markets. So there’s a lot of opportunities for wins. But again, our base case won’t include those.

Operator: And our next question comes from the line of Matt Taylor with Jefferies.

Matthew Taylor: I guess I’ll stay on the thread for a minute. You’ve gotten the 6 million commercial lives covered. I think based on MOBILE and prior analogies, we might expect it will be natural to see you have that readout, submit it and get NIT2 coverage by the end of next year around that time frame. But there’s been some chatter that maybe that comes earlier. I don’t know exactly where that’s coming from. Could you talk about the potential to get broader NIT2 coverage earlier in ’26? And what would be the mechanism to do that?

Jacob Leach: Yes. Thanks, Matt. So I think, as I mentioned before, this is really our expectation that it’s not if, it’s just when this coverage is going to come. The benefits for users are so clear in this population of non-insulin users as we continue to see further expansion, whether you look at it from the cost savings perspective to a payer in the first year or you really look at those outcome results that patients get. One of the things I think about is the study that we did in primary care in a very focused area in Ohio, where when we started that trial, the patients — there was over 170 patients in that study, only one of them was meeting the ADA’s recommended guidelines around A1c. And then within the 12-month period, more than half of that group was hitting the recommended target, and that was all based on CGM use and this is, again, a non-insulin population.

So just that type of powerful outcome is clearly some of the things that’s powering this expanded coverage over time. So timing is hard to predict, but we’re going to be ready for it when that coverage comes.

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

Joanne Wuensch: And Kevin, I hope you feel well soon. My question has to do with the 15-day sensor. It sounds like it’s in limited launch right now with the Warriors and then it will expand. What does it take to expand into a broader group? And how do we think about the revenue contribution as well as the operating margin or gross margin potential?

Jacob Leach: Yes. Thanks for that question. We are incredibly excited about this product launch, and it is in the Warrior community today. We’ve got a number of folks on the sensors. And we’re getting great feedback both about the performance of the sensors as well as the new extended duration and the accuracy of the product. And so we plan to be shipping into — with our channel partners here in the next couple of weeks to really being out that broader launch. And a lot of like getting ready for that was around making sure we got the coverage, as I mentioned, making sure we’re working with our insulin partners on the integrations and really just doing all the training and everything necessary to make this a very successful introduction of our next innovation.

Jereme Sylvain: Yes. And to your question on the margin impacts, given the timing of the rollout, we’ve never really expected it to be a big contributor this year. It will have a pretty nominal contribution from a gross margin perspective and from a revenue perspective. We do expect next year, it becomes an opportunity to go after additional patients for those folks that certainly are looking for longer wear time. I think it’s a great opportunity there. And clearly, from a margin perspective, all of the things we’ve historically said around the 15-day product, that still all rings true. So I think as that rolls out, we’ll be pushing it out into the field. And we’ll give you updates over the course of 2026 based on how that rollout is taking place.

But we sit here in a great position to launch it because our coverage is going to be robust when we launch it. Obviously, we’re going to have partners that are going to be ready to catch it and handle it and integrate it. And so having both of those ready, I think, is going to provide for a really exciting 2026.

Operator: And our next question comes from the line of David Roman with Goldman Sachs.

David Roman: I appreciate the feedback and updates regarding the performance of G7 and what you’re seeing in your own data. Can you maybe go into a little bit more detail about some of the actions you’re going to undertake to ensure that, that message is clear within the broader community? And one of the just highlights that comes to mind here is the extent to which there is such a consumer element to this category versus some of the other segments that all of us follow. You have a much broader swath of stakeholders to target. So maybe just talk to us about what the plan is to make sure that the message is consistent across all relevant stakeholders and maybe what investments you’re making to enable that?

Jacob Leach: Yes. Thanks for the question, David. So we are out in the field. That’s one of our primary communication points with customers, both the prescribers and our users. So we’re out there making sure they understand all the things we’ve done to address this issue. One of the things I’d like to introduce is the fact that we mentioned that our complaint rates have been generally stable over time, and that is true. One of the things we have seen though is at the beginning of the year, we saw those complaints around out-of-box failures increase. And what was really good to see is that the — those increases in rates there were offset by decreases in accuracy complaints, Bluetooth complaints, a lot of things over time that we’ve been working on.

So as we fixed the issue with the deployment, we really do anticipate seeing those complaint rates come down overall, which has really been our goal for a while. When it comes to engage with consumers, we’re really looking at how do we make sure that the message is clear on exactly what performance looks like and how much we’ve done to improve things. And so that’s really the message that I’m carrying as well as our entire sales team and all of our team members here are really focused on interacting directly with our customers.

Operator: And our next question comes from the line of Marie Thibault with BTIG.

Marie Thibault: Just wanted to go back to the scrap rate issue, make sure I understand that better. It sounds like that had to do with materials around deployment. Is that to do with the inserter specifically? And as we think about it improving, is that something we can put in the rearview going into 2026, going into the 15-day rollout? What’s kind of the timing on putting that all behind us?

Jereme Sylvain: Yes. And that’s — the way you think about it is exactly that. It’s how the needle ultimately drops the sensor off into the skin. And I think you can expect to see that really playing out. We’re expecting some of that to dissipate here into Q4. The underlying — when you look at the underlying standard performance and the standard costs and margin, that’s been really, really solid year-over-year. In fact, what you would see is you’d be really pleased with what that looks like. So what you’re seeing is and what’s playing through in the results is a few hundred basis points of what’s played out in the combination of freight and some of the scrapping we’re doing around these deployments. So what I would expect to see as we move into 2026, and as Jake alluded to, we’re really putting this behind us, we’d expect a lot of that to dissipate.

That gets you back to more of where we expect it to be a more normalized margin rate. And then you have the contributions, of course, of 15 days. So we do expect to be in a good position as we exit this year and get into next year. And with some of the things Jake had alluded to with lower warranty rates around Bluetooth, complaints around either accuracy and/or adhesives. As these get to be fixed as well, I think that’s also a potential opportunity. So some work to be done here, but I think we’re putting it behind us. Obviously, we see — we’ve improved a little bit from Q2. We expect to improve again in Q4. And you can see that implied by our guidance, which puts us in a good spot as we move into 2026. And we’ll give you one more clarity when we give official guidance for 2026 here in the next few months.

Operator: And our next question comes from the line of Matthew O’Brien with Piper Sandler.

Matthew O’Brien: And again, I hope Kevin is recovering right now. But just wanted to talk about the guidance for Q4. We — on a 2-year stack basis, we’ve decelerated here in Q3, especially domestically. And I think Q4 is also implying a pretty — another step down on a 2-year stack basis. And I think, again, most of that’s probably domestic based on how well you’re doing internationally. Why is that decelerating? And then if you do the 2-year stack in Q4, it’s a little less than 10% growth. Why are we comfortable in low double digits in ’26 if you’ve got some deceleration here at the end of ’24 — sorry, end of ’25?

Jereme Sylvain: Sure. Yes. Let me maybe talk about the quarter and just especially maybe more importantly, the guidance. I think that’s what you’re getting at is exit rates. And we understand we are getting at. So I’d first and foremost say, when you look at the year over time, the one thing to be mindful of is we are starting to see a more normalization in the seasonality of our business. So I think first, you have to remember, and that’s been happening over years now. And I think as you go back, you’ll see it, where the contribution as a percentage of the full year has been declining in Q4. And the contribution from Q1 has been increasing. And I would expect that to continue to take place this year. So as you’re comparing it, I think the one thing to be thoughtful about is Q1 actually has now a seasonality benefit.

You saw it this year, quite frankly. So I think you expect to look at it from that perspective. When you peel that back, actually, what you’re seeing is a pretty solid stack growth rate. I mean when you peel back those — remember, that Q4 dynamic now has been happening now for multiple years. So I think it’s important that as you zoom out and you think of it from that perspective, you look at the underlying patient base, which I think your models will show the underlying user growth has been solid. I think what you’re also expecting to see is the delta between unit volume growth and revenue start to come closer. You’re seeing it here in the third quarter, and you’re going to see it here for the back half of the year. So you put all those together, solid underlying user growth, which is how we really measure the business, and that continues to go well with consistent pricing and then the seasonality effect in effect, I think you can start to see exactly how we’re thinking about next year.

And that’s just as a base case. So hopefully, that gives you some context. Always happy to talk further about it, but I would include those as you’re assessing kind of modeling seasonality.

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

Michael Polark: I wanted to ask on gross margin and the fourth quarter implied guide, which were the last 2 questions. So I guess I’ll follow up on the gross margin, Jereme. I heard a few hundred basis points cumulatively from scrap and freight. Can you spike out or remind us on just how much is the freight component, how much is the scrap component as we run that out through the rest of the year into ’26?

Jereme Sylvain: Yes. It’s a little — yes, it’s basically 50-50. It’s in that ballpark of the impact. If you remember, we had in Q1, we had to expedite some freight and then we talked about for the rest of the year being about 75 bps for the rest of the year — on the full year numbers, by the way. So you can see why on the full year, when you put it all together, it’s about 50-50. Now as we get back to more ocean freight, and we expect to do that here, obviously, we put some stuff on ocean here exiting the third quarter and into the fourth quarter. Next year, the goal is to have a majority, if not all of our product really moving via ocean, especially as it comes over from Malaysia. So I’d expect to see certainly some benefit there.

And as again, as Jake alluded to, the out-of-box failures through the work we’re doing around sensor deployment as that comes down, again, we expect to see that dissipate. So think about 50-50 on both of those. And you can think about that on this year. So it gives you your jumping point exiting off of 2025 as to how to think about 2026.

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

Jayson Bedford: Maybe just for me on the type 2 uptake, can you just comment on the utilization within this user base versus those type 1 users?

Jacob Leach: Yes. Thanks, Jayson. So when we think about the utilization of our system across different customers, obviously, AID customers have the highest utilization, greater than 90% or so. So really, because of the fact that they need those sensors to power their system, they’re high utilization in that group. And as you kind of step down into the intensive insulin users, not on AND, you’re still in that north of 85% utilization for that group, again, because of all the benefits of the CGM and the fact that they’re on intensive insulin. So I want to make sure they don’t have the issues with hypoglycemia or anything. Now if we start to take a look at the broader type 2, starting with basal, that group historically has been pretty strong on utilization between like 80% to 85%, so pretty close to those IIT users.

And that, again, really comes from the benefit — shows the benefit they’re getting from the product. And we saw that in our MOBILE Study. We asked patients after they participated in that study, we want to continue using CGM. And 95% of them said yes, and we saw high utilization rates during that study. And that’s what we see in our field data. And as we step down into the non-insulin type 2, it’s lower than the previous categories, but still around that 75% utilization mark. And so something that we’re seeing also in our Stelo product as we have quite a few type 2 non-insulin users there that don’t yet have coverage for CGM. They’re using Stelo, and that’s definitely the highest utilization group for our Stelo product.

Operator: And our next question comes from the line of Shagun Singh with RBC Capital Markets.

Shagun Singh Chadha: I was just wondering, to what extent are the quality issues impacting new patient starts or did in Q3? When do you expect to return to record levels? And do you need that expanded access to return to record levels again?

Jereme Sylvain: Yes. So I think we covered a little bit earlier, and I know you’re jumping between calls. The expectation is there’s a little bit of an impact here in Q3, and we’ve seen it. And we’ve said basically that Q3 was still hundreds of thousands of patients, but just slightly below a record here. The expectation is certainly as we move into Q4, I mean, the internal expectations for Q4 is to push and get back to those records. And obviously, next year and we get into 2026, our assumption is going to be record new year for patients in 2026. And that’s, again, in our base case. And so — and that’s with existing coverage. So I don’t think we need necessarily new coverage to push into that. And that wouldn’t be our expectation going into it. Obviously, more coverage provides more opportunity, but those would be our expectations. And hopefully, that gives you some context.

Operator: And our next question comes from the line of Brandon Vazquez with William Blair.

Brandon Vazquez: Jereme, you were talking a little bit about the gap between growth in the volume and pricing closing a little bit. I was curious if you could quantify it at all, where if you do the math kind of in the U.S., especially, where our model suggests something like $1,400 to $1,500 annual revenue per patient somewhere in that ballpark, down a lot over the past couple of years, as you’ve alluded to. Where — are we in the ballpark there on that pricing? And then how does that pricing trend over the coming years? Where do pricing declines on a year-over-year basis start to level out?

Jereme Sylvain: Sure. Yes. I don’t think you’re far off. I mean, at the end of the day, we give patient numbers at the end of the year, and you can do the math globally, and we’ve talked about kind of the various splits. So I think you’re in the general ballpark there. The price — the year-over-year price isn’t much of an impact channel by channel. And so I think that’s really important to note. We don’t necessarily have significant pricing impacts, say, retail to retail or DME to DME year-over-year. Those typically fall in that 2% to 3% range. Where we typically see it is in mix. And in mix, it’s where you have folks moving — typically, there’s been a move to the pharmacy over time. That has been stabilizing over time. And so what you’re seeing is you’re starting to see that coming in.

And you’d expect it to see it come in, and we talked about this at the beginning of the year. So it’s playing out as we expected. The interesting thing going forward is just going to be — and this is why it’s not necessarily giving a number, but it’s just talking through how it’s going to work. As you start to think about where coverage exists today and as coverage gets knocked down, most of the new coverage opportunities are coming via the pharmacy. So you think about type 2 coverage, type 2 coverage in NIT is coming through the pharmacy. So that’s where your volume is going to continue to grow. On the flip side, there’s been a lot of talk about CMS coverage for type 2 and where that would be. And a lot of that would come through our DME partners, where you have Medicare fee-for-service going, and that would then change the method over time.

In both of those models, remember, the price year-over-year isn’t necessarily impact. It’s where patients are getting access to their product and then therefore, the underlying mix that makes that up. So I think what I would say is price isn’t the challenge. It isn’t the headwind, it’s more mix. And the mix has really stabilized. But usually, what happens is when we pick up a lot of new coverage, that’s a good thing at the end of the day. And obviously, a lot of coverage in type 2, that’s a great thing. And hopefully, and I know we’ve kind of talked about it a little bit here earlier on the call, we’re expecting a time when there’s CMS coverage over type 2 non-insulin and that could swing it the other way. So it’s just important to have your model set up that way.

It will help you follow along.

Operator: And our next question comes from the line of Jon Block with Stifel.

Jonathan Block: The OpEx leverage has made up for some of the gross margin shortfalls throughout 2025 to help with margin expansion this year. And so I’m just curious, when we think about 2026, is that sort of like a pure role reversal due to 15-day. And Jereme, you mentioned the underlying GM getting better? Or are there arguably additional OpEx opportunities that you still have? I guess what I’m getting at is how do we think about catch-up spend, if that’s the right way to frame it into ’26 on the OpEx line?

Jereme Sylvain: Yes. So what I would say is the work we’ve done this year is less about catch-up spend and deferral and things along those lines. It’s really the work we’ve done is more around — how do we get more efficient leaning into tools, leverage? Where do we hire folks in the world and how do we support things? How do we leverage the investments we’ve already made in technologies that we’ve made, quite frankly, years ago. So I don’t necessarily know that there’s a lot of catch-up spend. But we have done a lot of great work around it this year. And so we’ll give you a guide next year as we get there. But I mean, we do obviously talk about opportunities for gross margin in 2026, and we expect there to be those opportunities there.

In turn, I think there’s an opportunity to continue to lever in OpEx over time. We’ll see the pace in which we do that. I think there’s — we want to balance investment and don’t want to necessarily miss out on opportunities. If there happens to be expansions in coverage next year, we want to be well suited to take advantage of that. So we’ll make sure we balance the 2. But we know at the end of the day, our goal is to continue to deliver operation margin improvement over time. So we’ll make sure we balance those 2 in the best interest of growing the business long term, but also delivering results back to shareholders.

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

William Plovanic: The first off is really, I was wondering if you could talk just about the cadence of the new patient starts as we went through the quarter. Was it back-end loaded, front-end loaded to give us confidence that the fourth quarter might become a record quarter? And then I just — I know you talked in general about attrition rates, but have you seen any trends in the attrition rates, especially as you dealt with some of the quality issues?

Jereme Sylvain: Yes. I’ll start with the second one first. The attrition rates have been relatively stable. It’s all within the normal kind of ranges we look at. We pay a lot of attention to it. We track it really every week, we have a report out. We pay close attention. So we keep a close eye on it, and they’ve been stable. In terms of trends over the course of the quarter, I think what we’re seeing, at least I’ll maybe say anecdotally because I think it takes us a little time to get all the patient data in. I think you guys know this, it takes about 45 to get it all in. So I don’t want to make any sort of statements about the back half of September other than I think it’s very easy to take some of the anecdotal evidence. And we’re hearing a lot of very positive anecdotal evidence.

As we speak to our sales leadership and as they kind of pulse the field, I think the sensor deployment issues as those have waned in samples in the field and those have waned in the doctor’s offices, you’re seeing a lot of anecdotal positive feedback. And obviously, that then typically leads to performance. So it’d be too premature for me to give you a readout on September until I have all the data in the hands, and that’s the prudent thing to do. But anecdotally, I think we’re very encouraged by what we’re hearing. And Jake, you’ve been meeting with physicians all the time. Maybe you can walk through kind of what you’ve been hearing out there.

Jacob Leach: Yes, certainly. So we are hearing from our prescribers that they had some challenges earlier in first half of this year, in particular, around some of those deployments kind of flowing through into both their offices and then into the customers’ hands. And when customers have issues, they tell their prescribers about it, and we heard from everybody. And so when we saw it, we jumped on it and we resolved it. And it’s very consistent feedback as I talk to users and prescribers that things have improved dramatically. That being said, issues can still happen, right? You can have an accuracy issue. You can have sensor fall off. All those things, that’s why we’re making the investment in our service platform and making sure ultimately that it is a competitive advantage for us.

The digital investments that we’ve made are just the beginning around making it easy for customers to get exactly what they need. And that’s been a focus of mine, particularly over the last 6 months, looking at how can we improve what we’re doing. We’ve had a lot of plans that have been in place, and I think we’ve got a lot more coming. So it is a real area of focus for us to make sure that the experience of our users is the best possible.

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

Michael Kratky: I’d echo sending our best to Kevin. I’d like to circle back on a prior question, just about the breakdown of price versus volume growth in your U.S. 3Q number. So our expectation is that we would probably start to see you anniversary some of the significant pricing headwinds that you’ve seen just coming from channel shifts. So to what extent do you really see that in the third quarter? How should we think about that moving forward, both in 4Q and ’26?

Jereme Sylvain: Yes. It’s a good question. You clearly see some of it based on the growth number, right? And the unit volume growth is based on a patient base. And our ultimate unit volumes don’t necessarily change as much quarter-to-quarter. They’re based on underlying patient growth. And so what you see is a comp delta there. And that comp delta, as you know, is a channel mix issue last year that certainly hit us that we’re anniversary-ing this year, and that’s why you see the growth rate number there. So clearly, what you’re seeing is a narrowing based on the growth rate this year, but it’s a bit artificial. It’s a little bit — this is a bit higher than you otherwise would have seen because of the comp to last year. But nevertheless, you are seeing it.

And so I think you can see it here playing out in the third quarter. I think you’ll see it play out in the next quarter as well. Certainly, the comps get a little bit different next quarter. So I think that’s important to be mindful of. But as you step back over the course of the year and you look at the growth rate in the U.S., I think what you’re going to see is underlying unit volumes and revenue performance are starting to tighten up. And that’s what we’ve talked about over the course of the year. So quarter-by-quarter, it can get a little lumpy just based on some of the challenges we had last year. But step back, you can see that playing out over time. And to your point, we do expect to see that playing out in 2026.

Operator: And our next question comes from the line of Richard Newitter with Truist Securities.

Richard Newitter: I was just wondering, keeping with the very preliminary 2026 commentary, can you describe what’s in your base case for any kind of competitive dynamics, possibly even intensifying with Abbott coming out with a dual analyte. Would love to just kind of hear what you’re factoring in there. And then same kind of question, just what else are you willing to tell us about 2026 puts and takes as the base case as we’re thinking about next year?

Jereme Sylvain: Yes. And I appreciate the question. Our goal in at least talking to this was to give you guys some directional feedback as to what the base case would look like next year. Now the base case doesn’t represent what I would say is what we aspire to be over time, right? The base case is what I would say is a prudent way to start with the puts on the year. And so things like assumption around competitor product, those are absolutely always considered in there. Obviously, we’ll be thinking through anything from coverage — from known coverage decisions this year, which are already obviously in those base numbers. We’ll consider all of that really around the world. So that’s why we give you some of that context. And getting into the specifics, I think we got to give you the official guidance before we then get into the official specifics.

And that’s why we’re a little hesitant to start walking through each of the specifics. Obviously, we have a budget for next year. We have a long-range plan, a 5-year long-range plan that we all have in-house here. We’ll meet with the Board here in December and roll that out for you guys as we get into next year. But again, I think the context was trying to make sure everybody had an idea for how we were thinking about base case, and we’ll get into those specifics when we officially give guidance because then you can put math officially to the numbers.

Operator: And our next question comes from the line of Josh Jennings with TD Cowen.

Joshua Jennings: I wanted to just — I know it’s only been a couple of months since ADA in the 2Q call, but just any updates on the G8 platform and whether or not ketone sensing has kind of moved up the priority list? And any time lines when we could learn more or any time lines you can provide just in terms of when G8 could move forward towards commercialization.

Jacob Leach: Yes. G8 is an incredibly important part of our product portfolio in the future and our future innovation. It is a multi-analyte platform. And as we think about just in general, the cadence of innovation and what we’re looking at is we’re really focused on meeting broad user needs. So unmet needs across a broad base. We think about it in the type 1 space. We also think about it in some of the higher growth segments as well as the market like our Smart Basal technology that we were talking about. That’s a really important way to drive growth in that basal population and really meet those unmet needs. So yes, certainly, multi-analyte is an important part of the future platform. But as we look at G8, we’re not going to get into the time lines now.

But we will — one thing I want to let everybody know is we are planning to put together an investor event first half of next year. We’re actually going to hold at our Mesa manufacturing facility to give you guys a glimpse into our operations and our high-volume manufacturing plant. And that will be a good opportunity for us to talk about things like LRP and the portfolio of products and all the things we plan to do to drive this business forward.

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

Matthew Miksic: Can you hear me okay?

Jereme Sylvain: We can hear you.

Matthew Miksic: Terrific. So one question. I’m not sure if this has come up, but it’s one of the things we hear in the community recently is some folks holding on to G6 or going back to G6. And I’m just wondering if that’s a factor in sort of manufacturing efficiency or line management and what your thoughts are on how and when you’ll be able to transition off of that? And I have one quick follow-up, if I could.

Jacob Leach: So yes, for G6, we are consistently transitioning customers over to G7. And so the number of G6 users is consistently coming down. We have heard of some folks going back to G6, and it’s a very small number. It doesn’t really move the needle much at all. And we’re going to continue to make sure that G7 meets the needs of all users across the whole spectrum. So no one has a reason to stick with G6. Now we know that as we’ve seen in some of our previous upgrades between generations, when people are familiar with the technology and they’re happy with what they got, they’re going to — they may stick with it, right? And so over time, we’re going to keep moving people over to G7. And we haven’t announced the official conclusion of G6 in the market. We will, when the time is right, and we’ll make sure we give people a heads up when that’s going to happen.

Matthew Miksic: Okay. That’s great. And then on just general product strategy, the DexCom ONE strategy overseas, I think, has been successful in some geographies and kind of met the need that you had set out for that program. But generally, DexCom, of course, has been kind of a core central line product with much of the innovation building generations around the same — the central platform. I was just wondering if, at some point, you’re thinking about adjacencies or alternative approaches to helping patients manage diabetes or other glycemic elements of their life, but with a truly different platform, not a different version of G7 or G8. I’d love to get your thoughts.

Jacob Leach: Yes. I appreciate that question, really going into the thinking of broad markets and how do you address those unmet needs. DexCom ONE+ is doing great and a lot of that growth in France that we talked about is on that platform, and it’s really allowed us to compete in market segments that we weren’t previously because we were focused on the G Series products and the more acute end of the diabetes spectrum. So yes, DexCom ONE+ is a super important part of our portfolio approach to serving the needs of different customers. And the mobile apps and the experience are different there. I mean one another example I’d kind of point to as we expand the opportunity here is Stelo, right? Stelo is a product that spans a pretty broad spectrum of users from type 2 all the way down to prediabetes and then those that are looking at better understanding the metabolic health.

We will be taking that product internationally next year. And so we’ll see it in a number of markets where we’ve had a pretty good request and demand for Stelo outside the U.S. And we are — Dex Basal is a great example. I kind of mentioned it before, but that ability to help a prescriber and a patient really get to the right outcome safely in the clinical study around Dex basal, it was focused on getting people to the optimal dose as fast as possible with no hypoglycemia, and that’s what we saw in that study. And we’re also excited about the opportunity for it to drive better adherence. So once users, they’re going on insulin for the very first time, they’re taking an injection. They’ve maybe never done injections before. There’s some apprehension there.

But when you show them how much better their diabetes control is when they’ve got the right dose of basal insulin, it’s pretty motivating. And so we do expect to see some adherence improvements there and really just drive general outcomes. So focusing on outcomes for the broad population is what we’re trying to do here, and we do it in a number of different ways through different products and different software experiences.

Operator: And our final question comes from the line of Anthony Petrone with Mizuho.

Anthony Petrone: Best wishes to Kevin as well. Maybe one on gross margin as it relates to the G7 transition and one on just penetration. When you think about the transition to G7, how long do you think it will take to fully roll over the 10-day to 15-day? And what does that do to gross margin once you’re kind of on a 15-day heavier user base? And then some chatter just on penetration, even competitive results. When you think about type 2 noninsulin-intensive hypo risk and basal-only, you have basal-only penetration at 20% to 25% and non-insulin-intensive hypo at under 5%. What do you think a reasonable penetration for those 2 segments is over your long-range plan?

Jereme Sylvain: Yes. So I’ll start with maybe the second, which is getting into the markets. And we’ve always talked about basal as an example, being a market that should get to about 60% penetration over time. And that’s kind of our crystal ball. But it’s been pretty darn accurate as we thought about type 1 historically and type 2 intensive. So it’s what we think about, obviously, somebody taking insulin, having that sensor on there is a really nice thing, and we’ve proven time and time again the combination of the sensor plus insulin plus now obviously, DexCom Smart Basal in there. That’s a huge opportunity to meet an unmet need in a growing market. So we’re really excited about that offering and that can help people manage it.

So we do expect that. In the non-insulin and the type 2 hypo-risk population, it’s hard to know. That’s such a big wide swath of population, especially type 2. And those hyper-risk folks, while they’re covered, they do kind of sit typically — they’re typically seen like a type 2 patient, right? So we expect that to be — 60% is obviously higher than we would — it would be a high mark there just given where we think basal is. But anything more than 5%, which is where it is. And as it goes up to 10%, 15%, 20%, you’re talking about millions and millions and millions of people on the product. So more to come as we go there. We know it’s a lot more than today. And we know that with coverage, it’s going to be a lot more than today. So we’re really excited about that.

To your first question on gross margin, what can 15-day do and how long will it take? If you look at historical patterns of how long it’s taken from G5 to G6, G6 to G7, it does take a couple of years. As Jake alluded to, folks do get comfortable with technology and to get folks to change over, it does take a little bit of time. Our goal is obviously to go faster. And obviously, with the form factor very similar across 10-day and 15-day, I think there’s an opportunity, but it does require a different script. So we’re going to work on it over time. We’ll give you more feedback as it’s getting out into the field. We obviously — as we get into guidance next year, we’ll give you a little more color about what our assumptions are, and we’ll have a little bit of time under our belt.

So more to come on that one. But the impact obviously is significant for us as we move more and more from 10-day to 15-day and 3 sensors to 2. And obviously, the impact on margin can be significant. But it could also allow us to grow the business more, going into markets where with maybe a DexCom ONE+ product or other products where that 15-day wear life allows us to really compete with what would be a cash pay or a lower reimbursement market. So it allows both. It allows top line growth and going after more markets, and it allows opportunities to expand margin. Very excited about it.

Operator: And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the call back over to Mr. Jake Leach for closing remarks.

Jacob Leach: Okay. Thank you, everyone, for joining us today, and thank you for the well wishes to Kevin. I know he really appreciates that. And I’d like to wrap up the call today by expressing my deep appreciation to all the employees of DexCom. I’m extremely proud of this team and how we’ve continued to focus on serving our customers and not getting distracted. In the end, our core values are clear, and we will continue to be unrelenting in our mission to empower people to take control of health. We have a remarkable opportunity to improve the lives of millions of people around the world, and I couldn’t be more excited about the future. Thanks, everybody.

Operator: And ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.