DexCom Q1 2025 Earnings Report

DexCom EPS Results

• Actual EPS: $0.32
• Consensus EPS: $0.33
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.32

DexCom Revenue Results

• Actual Revenue: $1.04 billion
• Expected Revenue: $1.02 billion
• Beat/Miss: Beat by +$18.89 million
• YoY Revenue Growth: +12.50%

DexCom Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 4:30PM ET

DexCom (NASDAQ:DXCM), a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally. The company provides its systems for use by people with diabetes, as well as for use by healthcare providers. Its products include Dexcom G6 and Dexcom G7, integrated CGM systems for diabetes management; Dexcom Share, a remote monitoring system; Dexcom Real-Time API, which enables authorized third-party software developers to integrate real-time CGM data into their digital health apps and devices; and Dexcom ONE, that is designed to replace finger stick blood glucose testing for diabetes treatment decisions. It has also submitted FDA review for Dexcom Stelo for people with type 2 diabetes. The company has a collaboration and license agreement with Verily Life Sciences LLC and Verily Ireland Limited to develop blood-based or interstitial glucose monitoring products. It markets its products directly to endocrinologists, physicians, and diabetes educators. The company was incorporated in 1999 and is headquartered in San Diego, California.

DexCom Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to the DexCom First Quarter twenty twenty five Earnings Release Conference Call. My name is Luella, and I will be your operator for today's call. 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, Vice President, FP&A and Investor Relations at Dexcom]

Welcome to DexCom's first quarter twenty twenty five 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 Jeremy 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 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 twenty twenty five performance on the DexCom Investor Relations website on the Events and Presentations page.

[Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom]

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 ks, most recent quarterly report on Form 10 Q and other filings with the Securities and Exchange Commission.

[Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom]

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 reconciliation of these measures to their most directly comparable GAAP financial measure.

[Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom]

Now I will turn it over to Kevin.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Thank you, Sean, and thank

[Kevin Sayer, Chairman, President and CEO at Dexcom]

you everyone for joining us. Today, we reported first quarter organic revenue growth of 14% compared to the first quarter of twenty twenty four. 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

We work closely with our distribution partners to clearly align our updated supply timelines 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 prioritize 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Importantly, we made these commercial investments knowing that new DexCom technology and broader access were just around the corner. Since that time we introduced Stello 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 two market. We started the year by announcing that we had secured access at two of the three 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 two non insulin population compared to any time in our company's history.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

We'll now look to build on this momentum through targeted awareness campaigns and by advocating for even broader type two 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 three 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 three large PBMs and additional coverage we expect to finalize in the coming months, DexCom will have coverage for nearly six million people with type two diabetes who are not on insulin by the end of the year.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

While this still represents only a portion of this twenty five 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 two diabetes who are not on insulin. Similar to our mobile and diamond studies for the insulin using population, we believe this dataset can become the centerpiece of our broader Type two non insulin evidence roadmap.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

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 two coverage, we have already greatly simplified access to DexCom technology through the launch of our over the counter biosensor CELLo. CELLo continues to attract a wide range of new customers across the Type two diabetes, prediabetes and health and wellness landscapes. We have also seen growing use of CELLo 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 CELLo experience with new software updates and broader distribution.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

During the first quarter this included launching a one hundred and eighty 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 Stello app to provide new customer insights and deliver a more personalized experience. Stello 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Over the course of the first quarter, we saw even greater seller 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 were excited to build from this position of strength by announcing the addition of John Coleman as our new Chief Commercial Officer. John brings over thirty years of global commercial leadership experience to our organization across multiple healthcare segments and channels. Over this time he's established a proven track record of execution making John a great fit for DexCom at this important point in our company's history. We're excited to have him lead our commercial organization.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

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 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

As one example of our ongoing collaboration with the agency, we were excited to recently announce FDA clearance for our fifteen day Com G7 system. This marks another innovation milestone for our company as our fifteen day product advances both wear time and accuracy levels for G7. With performance data demonstrating an MARD of 8%, 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 fifteen day G7 system in the second half of the year and our team is working quickly to prepare for this rollout.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

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 Jeremy.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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 twenty twenty five, we reported worldwide revenue of $1,036,000,000 compared to $921,000,000 for the first quarter of twenty twenty four, 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 twelve months.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

U. S. Revenue totaled $751,000,000 for the first quarter compared to $653,000,000 in the first quarter of twenty twenty four, 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

S. With a particularly notable uptick coming from the Type two 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

This helped narrow the gap between U. S. Volume and revenue growth compared to the prior two quarters. International revenue grew 7% totaling $286,000,000 in the first quarter. International organic revenue growth was 12% for the first quarter.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Our international business demonstrated pockets of strength, particularly in areas we have highlighted recent coverage expansions in the Type two 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 two 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Our first quarter gross profit was $596,200,000 or 57.5% of revenue compared to 61.8% of revenue in the first quarter of twenty twenty four. 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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 $453,100,000 for Q1 of twenty twenty five compared to $428,900,000 in Q1 of twenty twenty four. Operating income was $143,100,000 or 13.8% of revenue in the first quarter of twenty twenty five compared to 140200000.0% of revenue in the same quarter of 2024.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Adjusted EBITDA was $230,400,000 or 22.2% of revenue for the first quarter compared to $220,900,000 or 24% of revenue for the first quarter of twenty twenty four. Net income for the first quarter was $127,700,000 or $0.32 per share. We remain in a great financial position, closing the quarter with approximately $2,700,000,000 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 $750,000,000 share repurchase program today.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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 twenty twenty five convertible notes and any other strategic uses of capital. Turning to guidance. We are reaffirming our prior revenue guidance of $4,600,000,000 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 2130% respectively. Our new gross margin guidance reflects the impact of our first quarter result and a few additional factors.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Our teams are doing a good job prioritizing investments in the areas while setting up our functions to scale efficiently. With that, we can open up

[Jereme Sylvain, Executive VP & CFO at Dexcom]

the call for Q and A. Sean?

[Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom]

Thank you, Jeremy. In addition to Kevin and Jeremy, 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 reenter the queue if necessary.

[Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom]

Please provide the Q and A instructions.

[Operator]

Thank you. We will now begin the question and answer session. Matt Taylor from Jefferies is on the line with a question. Your line is now open.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Thank you. Thank you for taking the question. Congrats on a good quarter. I wanted to touch on The U. S.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Growth improvement here and see if you could talk a little bit about two 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 and how quickly that gap closes would be helpful.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. Hey, Matt. Thanks for the question. This is Jeremy. Certainly happy to answer it.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

You know, in terms of in terms of supply dynamics, you know, I think we exited the quarter with the normal supply levels in the channel. And so, you know, we had to work pretty hard over the course of the quarter to make sure we got there. I think everybody knew when we signaled it in the February call that we were gonna 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

In terms of the impact then on 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 and and due to all the work that the the teams did to navigate through there. In terms of what that then means for volumes, etcetera, while we don't necessarily give, you know, volumes by region, what I think we have done in the past is we've given you new patient our total patient details. And we exited last year at about a 25% patient increase, which is a good analog for volume growth.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

And given the performance we saw over the course of the quarter record new patients, there's there's no reason to believe that the volume growth wasn't consistent with that. So that will help for the models. It'll also help when you consider Stellar as a component to that as you're thinking about what that impact is. But the big takeaway, and I think you're 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.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Awesome. Thank you.

[Operator]

Your next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

[Simran Kaur, Equity Research Analyst at Wells Fargo]

Hey, good afternoon. This is Simran on for Larry. Thanks for taking the questions. Maybe just on guidance, you delivered 14% organic growth in Q1, but left full year guidance unchanged. So Jeremy, I mean, how do you see the rest of the year playing out, particularly in the second half where the comps do get easier?

[Simran Kaur, Equity Research Analyst at Wells Fargo]

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 fifteen day launch?

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. So I can answer those. You know, in terms of the the guidance for the full year, you know, the big takeaway is first quarter is first quarter. And, you know, 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We're bullish on the business. It's just one quarter. We wanna see how the rest of the year unfolds. In terms of of of the guidance and how we're thinking about fifteen day, there was always a little bit of fifteen day in the guidance, the original guidance we gave, and there's still a little bit of of that in the current guidance we gave. And it's commensurate with the launch the launch expectations of the product, which is in the second half of the year.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Think when we when we gave the guidance at the the start of the year, we we mentioned it was a very small amount where we wouldn't necessarily change our guidance if the fifteen day timeline changed just given as a 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.

[Simran Kaur, Equity Research Analyst at Wells Fargo]

Great. Thank you.

[Operator]

Your next question comes from the line of Robbie Marcus with JPMorgan. Please go ahead.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Thanks for taking the questions. Congrats on a nice start to the year here. Wanted to ask on the Type two patients, particularly non intensive and basal patients. And you said you had good growth in non intensive Type two, I imagine basal as well.

[Robert Marcus, Analyst at JPMorgan Chase]

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 Basil is predominantly insured patients and a growing non intensive, but both for insured and non insured and some of the, the things you can, that you're doing to help, keep patients, reordering at high rates. Thanks a lot.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Yeah. 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, you know, the type two population in general, even the nonintense no insulin type two patients with reimbursement, we see utilization very good and retention very good as well. A bit lower than than our type one patients, but not significantly.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

I mean, it's and the mix has been very consistent over time. We've also seen with our Stellar users, for example, the type two patients who are purchasing Stellar are reordering quite regularly and staying on their subscription patterns and are much more likely to sign up, for a 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, Executive VP & CFO at Dexcom]

Yeah. Robbie, I I think and and we we we announced this, at your conference. So I think, you know, kudos to you for having it there. We updated and and published really our rates for the covered population there. You'll see those on our website.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

That hasn't changed since the last time we spoke. So the utilization has been and continues to be strong in those covered market as Kevin alluded to. When you don't have coverage, it's a little bit less. However, we are seeing strong uptake in Stello, especially in that type two user population. So good retention there, just maybe not as much as the covered population.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Appreciate it. Thank you very much.

[Operator]

Your next question comes from the line of Daniel Antalffy with UBS. Please go ahead.

[Danielle Antalffy, Analyst at UBS Group]

You so much. Good afternoon, guys. Thanks so much for taking the question. Just a quick question you know, the macroeconomic environment and actually less about tariffs and more about, you know, the several proposals for the the budget and Medicare and, you know, will we or won't we go into a recession? You know, that's a big question.

[Danielle Antalffy, Analyst at UBS Group]

I would love, Kevin, how exposed or unexposed or protected do 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. Thanks so much.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. I start with that, Danielle. This is a this is a question. We've done a we've done a full analysis on this in the past to just to see how what our exposure is, to coverage levels both from from coverage, employment, and then also, individual circumstances. And and I would say that by leaning into coverage the way we have and certainly making, you know, CGM at a core part of someone's care pattern, but also the cost we save the systems, and and demonstrate it time and time again.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

You know, while while everybody is impacted in the 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, 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 excited, but we are we're happy about the position we're in in the event that that takes place to weather it quite well. Kevin, if you have any broader No.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

I'll just reiterate what Jeremy 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 Basil. We've been able to demonstrate our value time and time again, and we believe we can continue to do so.

[Operator]

Thank you. Your next question comes from the line of Jeff Johnson with Baird. Please go ahead.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Thank you. Good afternoon, guys. Congrats on the quarter. Jeremy, 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.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

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 and maybe some manufacturing issues on sensors, things like that.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Where are you at now? You're talking about after 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. Thank you.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. Maybe I can start on the the 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, well done. And so from and then and then in terms of the the product and, you know, in the process, let me turn it over to Jake in terms of of of how we're thinking about that.

[Jacob Leach, Executive VP & COO at Dexcom]

Sure. Yeah. Thanks thanks for the question, Jeff. So, yeah. When you know, as we have a pretty robust warranty program around sensors and sensor issues do happen, and we've seen them on the boards too.

[Jacob Leach, Executive VP & COO at Dexcom]

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 yeah. 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 the the quarter, we're running at some record output.

[Jacob Leach, Executive VP & COO at Dexcom]

But that being said, we we have significant amount of testing and quality controls, and we feel very comfortable about that product. So there's no inherent manufacturing issue to fix. What we're really focused on is 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 those new customers. That's a lot of what's laid out in this first quarter.

[Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co]

Helpful. Thank you.

[Operator]

Your next question comes from the line of Jason Bedford with Raymond James. Please go ahead.

[Jayson Bedford, Managing Director - Medical Technology at Raymond James Financial]

Good afternoon and 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 was international impacted more by the supply dynamics?

[Jayson Bedford, Managing Director - Medical Technology at Raymond James Financial]

Thanks.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. Thanks for the question. You know, I think the pockets of strength alluded to a little bit in in the script. It was really more the France and Japan. You know, Japan obviously coming off of going direct there in France with Dexcom one coverage for Basil in the region.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

So those are the pockets of strength. You you do see some choppiness, quite frankly, in the international business. You saw a little bit of it last year, Jason, as as coverage wins come in and and come out and I shouldn't say come out, but come in and the timing of when they 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Some of them slide forward at times as well. And so what I would say is the underlying volume demand was was was strong, especially in the markets we're in. Some of the markets where we had some wins were indexcomone. We mentioned France being one of those decks com1 wins. We do expect wins across the board in the g series and and indexcom1 as we open up new markets over the course of the year.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

But but there will be some choppiness there. Underlying patient demand, underlying unit volume growth, still 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 help you guys model 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.

[Jayson Bedford, Managing Director - Medical Technology at Raymond James Financial]

Thank you.

[Operator]

Your next question comes from the line of Travis Seed with Bank of America. Please go ahead.

[Travis Steed, Analyst at Bank of America]

Hey, thanks for taking the question and 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. That's kind of directly related tariffs and curious about the use of, you know, some exemptions out there like the Nairobi exemption and if that's applicable to to you and kind of what you've assumed around that going forward.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. So happy to answer that question. You know, I think, first off, we have a a large manufacturing presence in The United States, and I think we're really proud of both our our manufacturing our manufacturing in Mesa and all the capabilities we've built here both in San Diego and Mesa to help. So, like, you know, we make a lot of product in The US, and so we we have a a lesser exposure there to tariffs from that perspective. You know, our industry does have various you know, our our industry has historically had exemptions out there, and so we've certainly leaned into those.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

And so we don't necessarily expect any material impact from direct tariffs. And I think I think that's we're we're comfortable with that position. We are seeing for, you know, raw materials and things that come out of the come out 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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, you know, 20 ish million dollars over the course of 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 and certainly try to find ways to get around it. Certainly, if there's tariff reform and and ultimately, they go away, that'll be helpful on the year.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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 end product, Travis, that we we did not assume anything from that perspective.

[Travis Steed, Analyst at Bank of America]

Alright. Super helpful. Thanks a lot, Jeremy.

[Operator]

Your next question comes from the line of Matt O'Brien with Piper Sandler. Please go ahead.

[Matt O'Brien, Analyst at Piper Sandler Companies]

Afternoon. Thanks for taking the question. Maybe just sticking with the fifteen day for a sec. I don't know exactly who this question is for, but just talk a little bit about the rollout of that product as far as integrating into the new integrating into the pumps, etcetera. And how do we think about, not necessarily this year, but in some of the out years, the contribution on gross margins?

[Matt O'Brien, Analyst at Piper Sandler Companies]

Can it be you know, a couple hundred basis points in a year in terms of gross margin benefit, or will it be more measured than something like that? Thanks.

[Jacob Leach, Executive VP & COO at Dexcom]

Hey, Matt. This is Jake. Happy to happy to take that question. Yeah. We were incredibly excited to to receive the approval for fifteen day, and we've got the the internal team very focused on getting this product launched.

[Jacob Leach, Executive VP & COO at Dexcom]

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 fifteen 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 a fifteen day. That that is going well. Our goal is to have compatibility at launch. That's always been our goal.

[Jacob Leach, Executive VP & COO at Dexcom]

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 they wanna upgrade to this fifteen day product. It does require a new prescription to get the fifteen days, so that does you know, there's a a process that folks go through in terms of utilizing their sensors. They have to see their health care provider and get the the the prescription, but very excited to get it out there. And, obviously, it does have an impact on on margins and improvement there.

[Jacob Leach, Executive VP & COO at Dexcom]

I don't think we're gonna give much guidance for beyond our our this year. We're really focused on this year, but I'm assuming you have anything

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. I would just say, you know, while we're not necessarily giving numbers, I think your question is more, you know, does does it snap overnight or is it more measured? I think the answer is it's more measured. And and the reason is is obviously, as Jake alluded to, new scripts. But, you know, we have still have folks on g six.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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, we had to move people move people quickly, and and we hope to outperform measured. But at the as you're thinking about it, I would 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 Tiebaud from BTIG. Please go ahead.

[Marie Thibault, Managing Director at BTIG]

Hi, good afternoon. Thanks for taking the questions and nice to see a very strong quarter. Wanted to ask here about the OpEx control that's being sort of assumed in the guidance, especially with some of the impacts of gross margin, but you're able to hold the operating and EBITDA guides. Just wanted to understand sort of where some of puts and takes are and and how you're able to accomplish that. Thank you.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. Why don't I'll start with that. And I and I think Jake you know, Jake's kinda leading a lot of these. But you know? So I think when we looked at at at the investments we've made and and certainly we put a lot of levers into the business over the years, you know, we've looked at the areas where where we can continue to invest in things that are really, really important.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

And we talked about some of the work we're doing around our next generation sensor and obviously some investment in in Stello 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 Salesforce. So now we can lever that. We've talked about leaning into AI and levering that and moving robotics and levering that throughout our business.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We looked at location strategies and we're leaning into levering that. There's there's been 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. You know, when you look at the total year, if you can kind of impact into it, you're gonna see well over a hundred million dollars of investment in OpEx even with that.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

So it's still a heavy investment into the business. Just pull in 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 and your teams.

[Jacob Leach, Executive VP & COO at Dexcom]

Yeah. Yeah. Certainly. I think, you know, the the the main message is is we're we're just becoming more efficient, in many of the things that we do. It's been a program that we've focused on for a number of years.

[Jacob Leach, Executive VP & COO at Dexcom]

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 and d and our next generation technology, we've done a nice job of trying to ensure that, we're not, we're we're making enough investment there, and and we've got that 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]

Thank you. Your next question comes from the line of Joanne Wuensch with Citibank. Please go ahead.

[Joanne Wuensch., Managing Director at Citi]

Good evening and thank you for taking the question and nice quarter. Let me just pause on the FDA warning letter. It didn't stop you from getting the fifteen 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?

[Joanne Wuensch., Managing Director at Citi]

Thanks.

[Jacob Leach, Executive VP & COO at Dexcom]

Yeah. This is Jake. Great question. So yeah. So we are basically working to implement a number of process controls.

[Jacob Leach, Executive VP & COO at Dexcom]

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 and and or the it doesn't restrict distribution at all. It 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 we've got a number of dedicated resources ensuring that that, is done, but it doesn't restrict us at all.

[Jacob Leach, Executive VP & COO at Dexcom]

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

[Joanne Wuensch., Managing Director at Citi]

Thank you very much.

[Operator]

Your next question comes from the line of Michael Pollark with Wolfe Research. Please go ahead.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Good afternoon. Thank you for taking the question. RFK Jr. Recently said in an interview that he thinks glucose monitors are extraordinarily effective and only cost $80 a month. So it's clear positive read from the head of HHS, and there's not many things on the right side of his ledger right now.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

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 two population? Does this change in leadership, you know, 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 two NIT RCT? Thank you so much.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

So I'll take a stab at that one. First of all, we're very pleased with the comments of the administration. It it hasn't just been RFK junior. There have been others who made comments about CGM being a great tool for health, and and we're thrilled with that, because we think it can be, and we are learning more and more every day even from our seller users. Those without diabetes, what they can learn and what they can do to improve their metabolic health and the type two users as well.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

With respect to to type two 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 and 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

We're working every, you know, 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, Executive VP & COO at Dexcom]

Yeah. I think we we love the recognition that CGM is a tool that can, you know, help help people both manage their condition, but also reduce health care costs. I think you're seeing that recognition certainly from RFK, from others, as well as that third PBM coming on to cover CGM and then IT. You know, I think that it's evidence, that the message is getting out there that CGM is the right tool for this. Your your question around RCT, so we do anticipate, finishing up enrollment in the first half of this year, and so that the trial's on track.

[Jacob Leach, Executive VP & COO at Dexcom]

And we do expect the initial readout from the trial. Late this year, but probably more likely early next year is when we get some of that data. But based on the real world evidence that we're seeing coming from our users that are using g seven and Stello, 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 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. Please go ahead.

[Margaret Kaczor Andrew, Research Analyst - Healthcare at William Blair]

Hey, good afternoon, everyone. Thanks for taking the question. 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?

[Margaret Kaczor Andrew, Research Analyst - Healthcare at William Blair]

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, you know, why not you know, are there offsetting factors to that or, you know, you just you don't wanna get ahead of yourselves?

[Margaret Kaczor Andrew, Research Analyst - Healthcare at William Blair]

Thanks.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Yeah. I can certainly take that one. And and what I would say is, you know, historically and and you know us all you know as well as, you know, coverage, you know, coverage is always a big, approach about how we went went about getting folks access to the product. And, you know, this quarter, we launched, obviously, with both two two of the three 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

And I think that's that's 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 on we're assuming that things go backward.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

That's not necessarily the case. I think the answer is is it's one quarter and we have we've guided for a full year. I think the answer is let's see how, you know, things play out over the course of this quarter, and and and certainly that'll help us give a little bit more color. It doesn't change our bullishness on the business, doesn't change, you know, our expectations that we have a a very solid year this year, but but I think it's too early in the year to start revising upward guidance. We wanna make sure we deliver against our promises, and and and that's what we're looking to do.

[Operator]

Your next question comes from the line of Mike Kratky with Leerink Partners. Please go ahead.

[Mike Kratky, Senior Managing Director - Medical Devices & Technology at Leerink Partners]

Hey, everyone. Thanks for taking our questions. Maybe just a quick follow-up to that last one. But alongside the acceleration that you're seeing in that type two non insulin patient population, are you seeing anything on the type one 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, Chairman, President and CEO at Dexcom]

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 one market, and we continue to do so. We also continue to add type one patients internationally and in The US every quarter, and we saw nice growth in our type one business this quarter right along the lines what we anticipated.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

So we're doing very well in new patients in type one. And as always, our retention utilization in that population is outstanding. It is an absolutely essential tool for managing type one diabetes.

[Mike Kratky, Senior Managing Director - Medical Devices & Technology at Leerink Partners]

Awesome. Thanks very much.

[Operator]

Your next question comes from the line of Matthew Blackman from Stifel. Please go ahead.

[Colin Clark, Associate VP - Healthcare Equity Research at Stifel Financial Corp]

Hi. 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.

[Colin Clark, Associate VP - Healthcare Equity Research at Stifel Financial Corp]

Thank you.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Sure. Yeah. This is Jeremy. You know, I think the the sales force continues to ramp up and do well. You know, we we kinda look back on record new patients and that's again, and it's been a first quarter, which typically isn't always our strongest quarter from a new patient's perspective.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

So it's great to see that in a q one. And and by the way, that's not a record q one. That's a record for any quarter. And so, you know, that's that's lovely to see. In terms of how we do that, well, you do that by penetrating type two non insulin users.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

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 a again, it was a really, really good quarter from us from that perspective. In terms of then channel, you looked at, you know, where we're we're playing and then how the channels work.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

You know, I think we had a we we talked about where we sat in the DME channel. And and and first off, I think we'd wanna say, you know, thank you to all the DME partners who've done a wonderful job working with us through the course of the quarter. You know, they went through the the supply journey with us and and worked well with us. And we we we believe we work well with them. We 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 and that's exactly where we are.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We've stabilized that share. We think we're in a good stable position with our DME partners. Appreciate their partnerships. We're and we'll work for the rest of the year to see if we could even do better than that. But that's where we sit today.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

So it's good progress. Our Salesforce continues to ramp and continues to do better every quarter, and it's exciting to see.

[Colin Clark, Associate VP - Healthcare Equity Research at Stifel Financial Corp]

Sounds great. Thank you.

[Operator]

Your next question comes from the line of Issey Kirby with Redburn Planting.

[Issie Kirby, Vice President- Equity Research - Medical Technology & Life Sciences at Redburn Atlantic]

I

[Issie Kirby, Vice President- Equity Research - Medical Technology & Life Sciences at Redburn Atlantic]

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 Stellar, sorry if I missed this, are you giving Stellar revenue again this quarter? And then just on Stellar, how are you sort of capturing potentially now that reinvestments improve to g series? How are you capturing or encouraging people to upgrade from Stellar to the g seven? Thanks.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Yeah. I'll start with that one. With respect to our type two nonintentive or non insulin patients, most of those are new patients and and new to DexCom CGM, particularly as we've expanded coverage. And we do have the best coverage amongst the PBMs of any any of our competitors out there. We're doing very well getting new ads on on those non insulin users.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

With respect to Stella revenues, Jeremy, I'll let you go ahead and talk about that guide.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Sure. Yeah. And Izzy, thanks for staying up late with us. Yeah. So I think, Stelo, the answer is is we we talked about it being two to 3%, of growth, on the full year, and we are right in line with that.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

So we're continuing to do well. While we haven't necessarily broken out revenue by the quarter, we will give you the growth contributions over the the year, and we're tracking right to that 2% to 3%. So right in line.

[Issie Kirby, Vice President- Equity Research - Medical Technology & Life Sciences at Redburn Atlantic]

Great. Thanks so much.

[Operator]

Your next question comes from the line of Bill Blavonik with Canaccord. Please go ahead.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

Great. Thanks. Good evening. Thanks for taking my question. Just on the fifteen day, as you walk through the contracting for this, you're reimbursed at a per diem.

[Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets]

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 fifteen day as you're working through those contracts? And if so, you know so does the price per day come down a little as you kinda do this? How should we think about that? Thanks.

[Jacob Leach, Executive VP & COO at Dexcom]

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

[Operator]

Your next question comes from the line of Chris Pasquale with Nephron. Please go ahead.

[Chris Pasquale, Partner - Medical Devices & Supplies at Nephron Research LLC]

Thanks. Congrats on the quarter. Two quick follow ups. Just I know you don't want to give a stellar 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 Jeremy, could you just go back to the 100 basis point impact you're assuming from increased freight and other things?

[Chris Pasquale, Partner - Medical Devices & Supplies at Nephron Research LLC]

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, Executive VP & CFO at Dexcom]

Yeah. Happy to happy to cover that. In in terms of Stello users, you know, I I can say there is some information out there that is public and I think I can point to it, you know, 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 I think that should give you some some context.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

It continues to do well. We continue to see more and more folks download it, use it, and and, you know, we'll be able to give you more and more retention utilization as we get under our belt. We know there's gonna be more intermittent usage, but the good news is is because they're all on the app, we'll keep tracking those. So there'll be a 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 still. So certainly great progress there.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

In in terms of why the freight, and and I'm happy to answer that one. So, you know, the answer is is we exited the second the first quarter getting supply levels down to normal, but we had almost, you know, no inventory on the shelves at that point. And so, you know, as we as we go through and and wanna make sure we have enough inventory on the shelves to help impact supply in the channel, we we have to do that. And that that's obviously a challenge when, you know, every every, you know, every week, every month, you're you're looking through and and trying to navigate through really, really low inventory levels as orders come in. So our our goal is is is to have really as a corporation ninety days of finished good, but at least sixty days of finished good on on the shelf.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

That allows us to navigate through the channel. And so we're gonna keep expediting fright until we get to that level. I think it's really important because that allows us to make sure that as you have pharmacies, etcetera, maybe running out of supply, we have enough in there to now help navigate that channel. So you're gonna see us continue to do that over the second quarter as we ultimately navigated through and into 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We can't stop, but it helps us slow us down. So we talked about in our commentary out of the gate, it'll 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 gonna have to work real hard to do that. That's why we've included in the guide, though. Those are those are expensive freight those are 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We're actually chartering flights specifically. So it's an expensive it's expensive form of freight, and that's why it impacts us the way it does on the year.

[Chris Pasquale, Partner - Medical Devices & Supplies at Nephron Research LLC]

Great. Thanks.

[Operator]

Your next question comes from the line of Steve Lichtman with Oppenheimer and Co. Please go ahead.

[Steve Lichtman, Managing Director, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thank you. Evening, guys. 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?

[Steve Lichtman, Managing Director, Senior Research Analyst at Oppenheimer & Co. Inc.]

Is it educating PCPs with the expanded Salesforce? Any color there would be great.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

It's across the board for us. Certainly, we'll have more direct to consumer advertising and more focused on that type two 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 Dexcom. I mean, if you go back a few years, if they're 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Now they can go to the drugstore with with many of these plans. There's zero 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

And so it's educational across the board. It's not just one customer. It's all of them.

[Steve Lichtman, Managing Director, Senior Research Analyst at Oppenheimer & Co. Inc.]

Great. Thanks, Kevin.

[Operator]

Your next question comes from the line of Matt Miksic with Barclays. Please go ahead.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

Hey. Thanks so much for taking the question. Not to maybe we code a lot here, but maybe follow-up on Stello. Last year, I think, ahead of some of the coverage that you talked about earlier in the year, it was maybe it seemed to have maybe slightly different role, slightly different target potential maybe. And then now it's still important, but as you've talked about Intexcom, G7 is with coverage sliding into some of these non insulin opportunities.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

So can you talk about how they think about the two products and where they how they overlay and fit together? Thanks so much.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

Yeah. One of the things we're most excited about with Stella was the opportunity has presented our Salesforce because if they walk into her primary care office now, they have two options to present a physician. If we don't, by chance, have coverage for a patient now, that physician can now, offer cell to that patient and, again, learn about the glucose behavior and value to that customer. The other thing that we are learning is covering coverage expands. Utilization and and retention or anything are always much better when there's reimbursement rather than paying cash.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

And one of the other things we have to consider with respect to the cello and g seven, you know, crossing of the roads. We're probably gonna have to move some of the cello features into the g seven app. And Jake and team are working on that. I'll let you go for a minute, Jake. Go ahead.

[Jacob Leach, Executive VP & COO at Dexcom]

Yeah. Sure. So I think, you know, part of that question was around how Stellows started when we first launched it. And and over time and first, we were focused on people with type two diabetes that didn't have coverage, right, as well as prediabetes. And as we continue to innovate on the product and as we're building up the pipeline of features that we're gonna bring, we are continuing to enhance its capabilities for those with diabetes, but also those that don't have diabetes.

[Jacob Leach, Executive VP & COO at Dexcom]

We've got our integration with Aura that we're very focused on for users, and we do anticipate that's gonna bring some more folks in to the Stella family that aren't don't have diabetes. So we are focused on expanding Stella's use cases well well beyond diabetes and prediabetes.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

Thanks for the color.

[Operator]

Your next question comes from the line of Anthony Picarone with Mizuho Group. Please go ahead.

[Anthony Petrone, Managing Director at Mizuho Financial Group]

Thanks. Good afternoon. And I'll stick on Stella. A question on the utilization intensity with a pre diabetic versus a non diabetic patient. Do you have any data on that?

[Anthony Petrone, Managing Director at Mizuho Financial Group]

Are you noticing more utilization intensity with prediabetics? And then just on channel access, where are most folks getting Stellar today? And when you think about Amazon, how much could that sort of just open the opportunity for Stellar? Thanks.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

Sure. Yeah. Happy to answer that question. I I the way to think about, you know, utilization patterns, at least the way that we've seen it today is, you know and folks have to when they they opt in to using Stello, it's it's a a it's how you opt in. Right?

[Jereme Sylvain, Executive VP & CFO at Dexcom]

You can choose die diabetes, prediabetes. I don't have diabetes. The way it works is for those that opt in and say, call it type two, they would be the highest utilization. Prediabetes kind of in the middle, and then I don't have diabetes the lowest. And so as you're trying to think through, you know, which populations adopt, that's the retention, you know, slash utilization I'm sorry, utilization rates you ultimately see.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

I think over time, and Jake alluded to a bunch of features going into Stella that are really targeted, really for everybody, but start to really engage the health and wellness population. There's opportunity to drive that up over time. And so we're really excited. But out of the gate, when we launched Stello, I think we talked about it, and Matt alluded to it a little bit earlier. It really started as a type two product, and we're pushing down the acuity curve.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We're we're pretty pushing down the acuity curve there. So we'll have more as as time moves on, but for right now, that's at least the the sequencing in terms of utilization. It's how I think about it from a model perspective. In terms of channel, it's still predominantly stello.com. Amazon is relatively new for us.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

It's really been about a month or so since it's been on Amazon live and and great uptake. We're really excited to see it. It's it's gonna be so at least for the first quarter, it's predominantly stello.com. Good news though is obviously Amazon is is everywhere. It's ubiquitous.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

And so as you have 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 to 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.

[Jereme Sylvain, Executive VP & CFO at Dexcom]

We'll have to give you guys updates as the quarter moves on as as to how it it shifts from stella.com to amazon.com. But as of right now, majority is stella.com, and we'll have to give you guys update updates on Amazon progress.

[Anthony Petrone, Managing Director at Mizuho Financial Group]

Thanks.

[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, Chairman, President and CEO at Dexcom]

We wanna thank everybody for participating today. This is another great quarter for Dexcom. The new patient growth and the revenue growth were 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.

[Kevin Sayer, Chairman, President and CEO at Dexcom]

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.

Participants

Executives

• Kevin Sayer, Chairman, President and CEO
• Jereme Sylvain, Executive VP & CFO
• Jacob Leach, Executive VP & COO

Analysts

• Sean Christensen, Vice President, FP&A and Investor Relations at Dexcom
• Matt Taylor, Managing Director at Jefferies & Company Inc
• Simran Kaur, Equity Research Analyst at Wells Fargo
• Robert Marcus, Analyst at JPMorgan Chase
• Danielle Antalffy, Analyst at UBS Group
• Jeffrey Johnson, Senior Research Analyst at Robert W. Baird & Co
• Jayson Bedford, Managing Director - Medical Technology at Raymond James Financial
• Travis Steed, Analyst at Bank of America
• Matt O'Brien, Analyst at Piper Sandler Companies
• Marie Thibault, Managing Director at BTIG
• Joanne Wuensch., Managing Director at Citi
• Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC
• Margaret Kaczor Andrew, Research Analyst - Healthcare at William Blair
• Mike Kratky, Senior Managing Director - Medical Devices & Technology at Leerink Partners
• Colin Clark, Associate VP - Healthcare Equity Research at Stifel Financial Corp
• Issie Kirby, Vice President- Equity Research - Medical Technology & Life Sciences at Redburn Atlantic
• Bill Plovanic, Managing Director & Equity Research Medical Technology Analyst at Canaccord Genuity - Global Capital Markets
• Chris Pasquale, Partner - Medical Devices & Supplies at Nephron Research LLC
• Steve Lichtman, Managing Director, Senior Research Analyst at Oppenheimer & Co. Inc.
• Matt Miksic, Equity Research Analyst at Barclays Investment Bank
• Anthony Petrone, Managing Director at Mizuho Financial Group