DEXCOM INC Q3 FY2024 earnings call

• Teri Lawver, Chief Commercial Officer, plans to retire, with Kevin Sayer assuming leadership and working with her as a Special Advisor. - US sales force expansion showed progress, with new prescribers up by nearly 35,000 clinicians. - DME partnerships stabilized after initial challenges. - International markets saw growth, including G7 launch in Australia and DexCom ONE+ expansion in 19 countries. - Stelo launched in the US, with positive feedback and distribution expansion. - Submitted DexCom G7 15-day CGM system to the FDA for review.

In the third quarter of 2024, worldwide revenue was $994 million, up 2% on a reported basis and 3% organically. US revenue totaled $702 million, a 2% decline year-over-year, reflecting slower new customer starts and channel dynamics. International revenue grew 12% to $292 million, with organic growth of 16%. Gross profit was $625.9 million, 63% of revenue. Operating expenses were $413.9 million, up from $391.5 million in the prior year. Adjusted EBITDA was $300.1 million, 30.2% of revenue.

• Maintained 2024 revenue guidance of $4.00 billion to $4.05 billion, reflecting organic growth of 11% to 13%. - Reaffirmed 2024 margin guidance: non-GAAP gross profit margin ~63%, non-GAAP operating margin ~20%, adjusted EBITDA margin ~29%. - On track to achieve $4.6 billion revenue and corresponding margins in the 2025 long-range plan.

• Channel mix shifts and rebate dynamics could impact revenue. - Competition in the CGM market, including potential new entrants, could affect market share. - Risks associated with regulatory approvals for new products like the G7 15-day sensor.

Q: How did the US performance compare to consensus?

A: Kevin Sayer noted the quarter was rocky but overachieved on guidance, with new patient adds at record levels and 35,000 new prescribers. DME channel stabilized, and Stelo message aids sales.

Q: What's the outlook for the CGM market growth?

A: Kevin Sayer believes the market can grow faster, citing factors like basal coverage and untapped markets.

Q: Are record new starts in the US including Stelo?

A: No, record new starts exclude Stelo, focusing on G-Series/T-Series.

Q: Details on DME channel actions?

A: Kevin Sayer mentioned meeting DME partners, being more channel-agnostic, and focusing on volume to regain partnership trust.

Q: Timing and financial impact of G7 15-day sensor?

A: Submitted to FDA, timing uncertain, but expected to be a margin lever with longer wear period benefits.

Q: Stelo pricing and distribution?

A: Stelo will be priced considering partner margins, with distribution via DMEs, doctors, and stelo.com.

Q: 2025 US recovery and rebate impact?

A: Jereme Sylvain said rebate impact will be less, with stable market and Stelo contribution.

Q: Stelo revenue guidance and usage?

A: Projected 1% of revenue, with over 70,000 users, focusing on learning and enhancing user experience.

Q: New user starts and attrition?

A: Record new patient starts, with attrition remaining stable across categories.

Q: Channel mix shift risk?

A: Kevin Sayer said well-positioned to serve pharmacy channel, with Medicare DME channel reimbursement limitations.

Q: G7 15-day sensor supply and durability?

A: Manufactured on current lines, durability expected to be solid with standard cost unchanged.

Q: Competitor CGM shortages impact?

A: Jereme Sylvain said no significant impact, with sales force driving new physician interest.

Q: International growth drivers?

A: Access wins in markets like France and Japan, with basal insulin coverage expansion.

Q: Stelo reordering and retention?

A: Reorders good, retention early, focusing on creating delightful user experience.

Q: LRP splits and Stelo durability?

A: International growth to continue, Stelo sensor life mirroring submissions, G7 15-day survivability confident.