DexCom Q2 2022 Earnings Call Transcript

Participants

Corporate Executives

• Sean Christensen, Investor Relations
• Kevin Sayer, Chairman, President and Chief Executive Officer
• Jereme Sylvain, Chief Financial Officer

Analysts

• Robbie Marcus, JPMorgan Chase & Co.
• Jeff Johnson, Robert W. Baird
• Margaret Kaczor, William Blair
• Joanne Winch, Smith Barney Citigroup
• Matthew O'Brien, Piper Sandler Companies
• Jayson Bedford, Raymond James
• Travis Steed, Bank of America Co.
• Marie Thibault, BTIG Research
• Mathew Blackman, Stifel Nicolaus
• Unidentified Participant
• Steven Lichtman, Oppenheimer Holdings Inc.
• Nathan Travis, Wells Fargo & Company

Presentation

[Operator]

Welcome to the DexCom Second Quarter 2022 Earnings Release Conference Call. My name is Darryl, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded. I will now turn the call over to Sean Christensen. Sean, you may begin.

[Sean Christensen, Investor Relations at DexCom]

Thank you, operator, and welcome to DexCom's second quarter 2022 earnings call. Our agenda begins with Kevin Sayer, DexCom's Chairman, President and CEO, who will summarize our recent highlights and ongoing strategic initiatives; followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. Following our prepared remarks, we will open the call up for your questions. At that time, we ask analysts to limit themselves to one question so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our second quarter performance on the DexCom Investor Relations website on the Events and Presentations page.

With that, let's review our Safe Harbor statement. Statements we will make in 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 in this presentation 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 presentation 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 with respect to our non-GAAP and cash-based results. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional 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 second quarter earnings presentation for a reconciliation of these measures to their most directly comparable GAAP financial measures. Now I will turn it over to Kevin.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

Thank you, Sean, and thank you, everyone, for joining us. Today, we reported another strong quarter for DexCom with second quarter organic revenue growth of 16% compared to the second quarter of 2021. Momentum for global CGM adoption remains high, and we once again achieved worldwide record new customer starts in the second quarter, following some disruption early in the year related to the Omicron wave. Office access has continued to improve, and we experienced a return to a more normalized customer journey, which helped us deliver this record. Customer satisfaction also continues to reach new levels, as our US Net Promoter Score hit another all-time record in the second quarter. Our customers value the differentiated experience that DexCom provides with consistent praise for our real-world accuracy, connectivity, actionable features and customer support. Product performance has been a hallmark for DexCom throughout our history. Customers and caretakers alike rely upon the accuracy of DexCom CGM and can be confident in performance across all aspects of glucose management, backed by numerous clinical trials and borne out by real-world experience. We have long viewed software as an avenue to differentiate, enabling unique user experiences, supporting greater connectivity, and enhancing our ability to move more seamlessly into new markets.

In support of this vision, we have invested significantly in building our software infrastructure in recent years and now spend more of our R&D budget on software than hardware. A tangible example of this can be found in our rollout of DexCom ONE. This product leverages our G6 hardware and will use our G7 platform in the future, but uses software to provide a different experience in our G-Series systems. This has allowed us to meaningfully expand our market presence in recent months, entering new markets and winning tenders internationally that were previously not available to our G Series product. This is just the beginning of our journey on leveraging software to great products that meet the needs of our end users. Our software infrastructure has also positioned us to be the partner of choice for technology companies looking to build new and innovative experiences around CGM data. Our list of real-time API partners continues to grow as we're the only company that can provide partners real-time CGM data in an FDA-regulated solution. Our software capabilities are also laying the foundation for our success beyond the intensively managed population.

For example, two partners focused on the use of CGM for weight management and metabolic health, Signos and Level Health, have clinical trials underway that are leveraging our real-time API capabilities. We are excited to see the outcome from these trials as they provide a glimpse into the future for CGM technology that could serve as a much broader end market than today. The second quarter saw a number of strategic accomplishments in international markets that continue to strengthen our competitive position. The excitement continues to grow for our portfolio of CGM systems, G6, G7 and Dexcom ONE and we've made significant strides in both direct and distributor markets to broaden access to our technology. We launched Dexcom ONE in both Spain and the UK and have secured reimbursement for key segments of the population. Opening large parts of these markets have previously lacked reimbursement for DexCom CGM. We also announced a partnership with Roche to distribute Dexcom ONE in Italy. This relationship will allow us to leverage Roche's well-established commercial infrastructure to bring Dexcom ONE to a much larger Italian market.

In Australia, the government recently committed to providing subsidized access to our G6 system for all people living with type one diabetes, which is a significant improvement in coverage and a great win for us deserving access to CGM technology. Our limited launch of G7 in the UK continues to be met with significant enthusiasm from our customers who provided consistently positive feedback on product size, ease of use, the shorter warm-up time, the app experience and more. Many customers shared that they would often forget they were even wearing the G7 during their session and indicated they can't wait to continue wearing the product full time in the future. The period has proven to be incredibly valuable, allowing us to assess the functionality of the sensor and app in a real-world setting and providing feedback on ways to refine our support system to make the broader rollout as streamlined as possible. We are excited to get G7 in the hands of more customers and plan to expand our launch in the third quarter, starting in the UK.

In the U.S., our 510k submission for G7 remains under review with the FDA. As part of this process, we are making a subtle change to the G7 software based on feedback from the FDA, slightly delaying our expected time lines for clearance and US launch. We expect FDA clearance and limited launch later this year and a large commercial launch in the US in the first quarter of 2023. Encouragingly, our preliminary discussions with payers have progressed very well. They understand what this product will mean for our customers and people with diabetes broadly, giving us increasing confidence in the ability to ramp up commercial coverage quickly. Finally, we were very proud to showcase our expanded CGM portfolio at two of the largest diabetes conferences of the year, ATDD in Barcelona and ADA in New Orleans. These events provide us an opportunity to connect with thought leaders across the diabetes space, and we continue to see a clear consensus on real-time CGM being the standard of care in diabetes management and a growing appreciation of the health and economic benefits of extending the use of this technology beyond the intensively managed population, including the broader type two population and use in the hospital. Between these two events, there were dozens of presentations, abstracts and posters highlighting success stories of CGM to-date and what the future could hold for this technology.

I started attending diabetes conferences almost 30 years ago. As I look back even two or three years ago, these types of conversations around the broad potential of CGM were non-existent. Now it's become very apparent that CGM data will become the basis of where diabetes management and glucose control in the future is headed. We're very excited about the opportunities to add for DexCom. And with that, I'll turn it over to Jeremy for a review of the second quarter financials. Jeremy?

[Jereme Sylvain, Chief Financial Officer at DexCom]

Thank you, Kevin. 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 on our IR website. For the second quarter of 2022, we reported worldwide revenue of $696 million, which included $12 million of unfavorable foreign currency impact. This is compared to $595 million for the second quarter of 2021, which represents growth of 16% on an organic basis. We have slightly changed our definition of organic revenue based on feedback from our stakeholders to exclude currency and acquisition-related revenue in the trailing 12-month period. Volume growth for the second quarter came in around the mid-30% range on a global basis. US revenue totaled $511 million for the second quarter compared to $462 million in the second quarter of 2021, representing growth of 11%. Customer demand remained strong in the US, and our unit volume growth continued to grow at a very healthy clip this quarter, relatively in line with recent quarters.

We have been launching a number of new tools for our sales force in the US that leverage technology to make each physician visit more efficient and effective. These tools inform our team what each doctor is prescribing, the makeup of their payer mix and even compare their out-of-pocket cost for each customer. This data can make each visit more impactful and help us continue to address the competitive mix that still exist in the market. We continue to see an ongoing impact from revenue growth from our strategic shift to the pharmacy channel, but as discussed previously, we believe this will ultimately set us up to serve meaningful, more customers over time. International revenue grew 39%, totaling $185 million in the second quarter. Organic revenue growth was 34% for the second quarter. Our positive momentum continued this quarter as the number of global initiatives we implemented in the past year has significantly improved our competitive position in international markets.

In addition to the Dexcom ONE new market wins Kevin highlighted before, we also continue to drive greater reimbursement in our initial launch countries in Eastern Europe this quarter. While we previously announced that patient reimbursement in Bulgaria and Estonia, Latvia and Lithuania have now established full or partial reimbursement for individuals with type one diabetes. This is a great example of how our CGM portfolio strategy can help us enter completely new markets and be a catalyst for access. Through new product launches and reimbursement efforts over the past 18 months, we are happy to share that we have increased the reimbursed access to our product by more than three million customers, and look forward to getting this much-needed technologies in the hands of as many people as possible. Our second quarter gross profit was $449.5 million, or 64.6% of revenue compared to 70.1% of revenue in the second quarter of 2021. Given the initial launch of G7 in the UK, this is the first quarter where G7 development costs started to flow through COGS, accounting for some of the expected year-over-year step down in gross margin. Additionally, there were greater than 50 basis points of impact from currency in the quarter.

Our second quarter gross margin was a nice step-up from the first quarter and leaves us on track to hit our margin targets for the full year. Operating expenses were $347.6 million for Q2 of 2022, compared to $315 million in Q2 of 2021. Similar to last quarter, we generated meaningful operating expense leverage despite incremental investment to support the G7 launch. We saw opex as a percentage of sales this quarter drop by 310 basis points year-over-year, as we continue to leverage our R&D and G&A expense lines. Operating income was $101.9 million, or 14.6% of revenue in the second quarter of 2022, compared to $101.5 million or 17.1% of revenue in the same quarter of 2021 as a tough year-over-year gross margin comp was partially offset by operating leverage in the quarter. Adjusted EBITDA was $175.5 million or 25.2% of revenue for the second quarter compared to $156.6 million or 26.3% of revenue for the second quarter of 2021. Net income for the second quarter was $69.5 million, or $0.17 per share. We remain in a great financial position, closing the quarter with approximately $2.8 billion worth of cash and cash equivalents. This provides us the flexibility to continue to invest in our organic growth opportunity, including the ongoing build-out this year of our Malaysia manufacturing facility and to assess any compelling strategic investments that present themselves.

Along those lines, we announced today a $700 million share repurchase program, which will allow us to offset the dilutive impact from our 2023 convertible notes. We are always assessing the best uses of our capital. And given the recent market pressure, we view this as a great time to invest in our own business as we remain incredibly bullish on the sizable opportunity ahead for DexCom. Turning to guidance, we are updating our full year 2022 revenue guidance to a range of $2.86 billion to $2.91 billion. For margins, we are reaffirming our prior full year guidance of gross profit margins of approximately 65%, operating margins of approximately 16%, and adjusted EBITDA margins of approximately 25%. This guidance factors in a significant uptick in currency headwinds, relative to the expectations we shared a quarter ago. We now expect around $40 million of foreign currency headwinds for the full year relative to our prior estimate of around $15 million to $20 million. With that, I will pass it back to Kevin.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

Thanks, Jereme. As I look at this quarter, our underlying fundamentals remain incredibly strong. We experienced another quarter of solid volume growth, achieved worldwide record new customer starts, recorded our highest-ever customer satisfaction rating. These results were before any material contribution from G7, which we expect to improve the customer experience in every way. We advanced our CGM portfolio outside the United States with a wider rollout of Dexcom ONE, helping us reach more reimbursed lives and serving more new customers. For G7, the feedback from our limited launch in the UK has been fantastic, leaving us incredibly excited for a broader global launch in the coming weeks. And in the US, we now have clear visibility to the finish line on G7 clearance. And our preliminary payer discussions are setting the stage for a big launch early next year. Despite all the macroeconomic challenges that exist today, runaway inflation, supply chain challenges, FX headwinds, we reiterated our margin guidance, continue to have no delivery delays across our business and remain committed to driving additional operating leverage in the coming years.

And finally, we announced a $700 million share repurchase plan today. This will allow us to offset the dilutive impact of our 2023 convertible notes and also provides us an opportunity to send a clear message. We're betting on ourselves and the mass opportunity ahead of us. We're optimistic as we've ever been about our future. With that, I'd now like to open up the call for Q&A. Sean?

Questions and Answers

[Sean Christensen, Investor Relations at DexCom]

Thank you, Kevin. [Operator Instructions] Operator, please provide the Q&A instructions.

[Operator]

[Operator Instructions] And our first question comes from Robbie Marcus from JPMorgan. Go ahead, Robbie.

[Robbie Marcus, Analyst at JPMorgan Chase & Co.]

Great. Thanks for taking the question. It was when you filed G7 last year, you had a pretty high degree of confidence in the completeness of the filing. So one, wondering if we could get a little more on what it is with the software? What you have to change? And how different it's going to be from the European version? What gives you that level of confidence and how to think about US sales growth until we get a G7 launch? Thanks.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

Robbie, this is Kevin. I'll take the G7 questions. The software revisions relate to the management of the alerts and alarms in the US app. FDA had some questions about some of the things that we've done and put in it. We discussed several options that we had. We decided the best option at this time was to revise the software and file it differently, and we've added a few other features to it as well based on our discussions with them. We're in the middle of revising the software for that and have to run it through the complete validation and verification process and resubmit. We're not done with it yet, but we're working very quickly to get done with that. And that's really our big major issue we talked through everything else. We did have a strong level of confidence and we still do in our relationships and our discussions with the FDA and G7. The one thing we figured out as we've been through this process is, we changed absolutely everything. We changed the algorithm. We changed the insertion techniques. We changed every manufacturing procedure that we have and completely rewrote the entire app and the software experience, which is a lot for them to digest and a lot for us to submit.

If I look at learnings for us over time, I think we'll probably do things a little more incrementally going forward, rather as big as this one was, and we can get things through faster. But we're in a good spot. We have a lot of clarity as to where we need to go going forward. And I'll let Robbie handle the growth issues regarding G6 because we're still doing extremely well with that product. I'm not Ravi, Jereme, go ahead.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Hey, how are doing, Robbie, and thanks for the question. So in the US, look, the quarter here, we had about 11% growth. That's generally due to some of what we talked about in prior quarters, us getting into physicians' offices. And as those new patients didn't hit those record levels, you ultimately see that recur on a recurring business model such as ours, it plays through. What gives us a lot of confidence for the back half of the year is Q2 was a record, and we're back on that record track and we do expect strength for the rest of the year to the point where we expect US growth rates to accelerate in Q3 and Q4, as we come off of this quarter where we see these record new patient starts. And quite frankly, we expect to have record new patient starts going forward for the balance of the year, even without G7. So I hope that gives you that question. We're very confident in G6, and obviously, we're even more confident in G7 once that launches.

[Operator]

And our next question comes from Jeff Johnson from Baird. Go ahead, Jeff.

[Jeff Johnson, Analyst at Robert W. Baird]

Thank you. Kevin, I just want to go back on your comments about revising some of the software on the alerts and alarms on the G7 product. So it sounds like to me you're still in the process of that. But I think you also said in your prepared remarks that you were comfortable, that you would still have a limited launch in the fourth quarter and a fuller launch in the first quarter of 2023 in the US. So one, can I just confirm that's what you said? Two, do you have some better certainty on all the other aspects of the filing from the FDA that gives you that ability to draw that line in the sand? Or at least where is your confidence on that time line? Thank you.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

We do have great certainty on the other components of the filing with the FDA. We've talked through all the other questions and things that we've discussed, and we're very, very comfortable with that. So really, the outstanding major item is revision and filing of the revised software after we validated and verified all of that. So we are very, very comfortable with that. And yes, what I did say is we are anticipating a limited launch in the fourth quarter in the US and then the full-on rollout in -- early in the year in 2023. One of the things I said in my prepared remarks is we're very bullish about the progress we've made with the payers as far as getting the G7 reimbursed, because they can see how important it's going to be for our patient base. So, on the one hand, while we have the delay in the approval and the launch that -- look, none of us -- we don't like to be faster. The other thing we're seeing on the other side is a lot of cooperation in the payer community and just in the channel, in getting this thing positioned for reimbursement very quickly after approval, so we can get the launch out and not too different of a time frame on a reimbursed basis from what we expected in the beginning. So those two factors together, again, add to where we think we are.

[Operator]

And our next question comes from Margaret Kaczor from William Blair. Go ahead, Margaret.

[Margaret Kaczor, Analyst at William Blair]

Hey, good afternoon guys. Thanks for taking my question. I wanted to maybe dive a little bit further into kind of this new patient add growth just because it's important as we get into 2023 as well. But any details that you can give in terms of how it looks like within T1, T2 intensive and others? And if there have been any changes, I guess, in the last six, 12 months? Are things getting harder or easier? And what kind of efforts you guys put in place to reaccelerate more meaningfully those new patient adds? Thanks.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Sure. Yes, I can answer that. And thank you for the question. What we saw, and I think this is -- we've really talked about it is we found our folks are most effective when they're able to get into physicians' offices. That's always been the case, and it's continued to show itself time and time again. And so what we found is it rises all tides once we're able to do so, but the predominance of where our new patient adds are coming if you want to kind of see what the more accelerate is, it's really in the type two intensive space. As we get into more primary care physicians offices, these are folks we've called on really for the first time as we've expanded our sales force in 2021, getting their in-person has really unlocked that market, and that's what you continue to see. And so now our focus is -- and we talked about it a little bit in the prepared remarks, now that we're in these offices, a record new patient quarter this quarter, certainly, that's encouraging. But we're also seeing that all of these tools that have been put in place means every call, every visit, every time we're in the office, we're able to be more effective about what might be the prescribers' decision-making around that particular patient.

And through doing that, whether it's debunking myths around co-pays and what the out-of-pocket is and making sure folks understand the cost, whether it's the ease of use in showing folks that a majority of our patients are able to put it on and use either training online or simple training in the box to ultimately put it on their body. What we're really finding is we're breaking down all of those myths out there, and our sales force continues to get more and more effective. So we're going to continue to do that over time. And we're seeing that continue to play out as better prescriber patterns, more prescriptions per provider and more providers coming over to prescribing DexCom. So all of those are playing out, which is what gives us confidence for acceleration in the US in the back half of the year.

[Operator]

And our next question comes from Joanne Wuensch from Citigroup. Go ahead, Joanne.

[Joanne Winch, Analyst at Smith Barney Citigroup]

Good evening, or afternoon. Thank you. I'm a little bit curious about some of the reimbursement landscape and things which may or may not have changed. Where do you think reimbursement is for bolus? And are you seeing any other changes as it relates to prior authorization or one product versus or another or anything else that we really should be aware of? Thank you.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Thanks, Joanne. Yeah, I can take the question. So in terms of basal, we continue to make progress there. So as you think about where we're having the conversations, the conversations are both on the government in the US, CMS as well as the US commercial providers. We're having conversations with both. And our access team has submitted the data. They've submitted both clinical data, economic data as well as clinician recommendations. And so we are going through those conversations. So it's been submitted. Discussions are ongoing, timing is hard to peg in all of these, but we are continuing to advance it forward in terms of conversations. So that's basal. Will certainly be -- as that progresses forward, we'll continue to give you line of sight as to how that goes. In terms of other areas, so existing coverage in areas around prior authorizations or otherwise, we haven't seen a lot of that. Now there are occasionally plans that have a prior authorization pop up or pull out, our goal is to all of the renegotiations that take place to limit those prior authorizations.

And as we continue to show how CGM can improve patient outcomes, it's becoming very clear that prior authorizations, we see payers starting to pull those down over time, a better way to put it. And so we continue to expect to see and keep pushing that. We have not seen a material change in any form or factor. In fact, for the most part, we see them coming down, and we'll expect to see that over time in the intensive space.

[Operator]

And our next question comes from Matthew O'Brien. Go ahead, Matt.

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

Great. Thanks for taking the question. Can we just -- as I look at the stock, down 18% in the aftermarket, that six billion in lost market cap even a little bit more than that. So I think it'd be helpful, I don't know if the reduction of the top line guidance from 20 down to 19 or maybe it's a little bit more is largely because of G7. But I'm thinking it's like a $60 million headwind, maybe something like that this year versus not getting the approval. So is it about $100 million of incremental pressure you're going to see next year and not having the approval earlier this year that you can't get all the marketing activities up and going next year? Just how do we frame up some of this modest delay? It seems like on the payer side, things are better, but just frame up what this modest delay may do to the top line as we look forward.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Sure. I can talk about, at least for 2022, and how it operates, and we can maybe not get to too much into 2023, but it can help that conversation. So a lot of the guidance and the pull down of guidance is related to currency. So it's not necessarily related to the G7 and the timing associated with that. So as you look at where we're going and where we pulled that down, currency has, especially outside the US, has played a large impact on reported growth rates. And that's one of the reasons why we've shifted and how we talk about organic growth. As you zoom back into the US, the G7 delay does have a little bit of an impact on guidance. And so certainly, we would recognize that we had some impact in there and assumed it would launch. The longer-term impact is really determined on how fast we get commercial coverage and how fast we can roll it out. And so what we believe is by working alongside our coverage teams, and trying to get access as fast as possible. And while we're working through getting formal approvals, partnering with folks to get quicker access and quicker coverage, we believe we can work on getting those patients back in quicker and faster to where we don't believe it's going to be a material impact on 2023 and beyond. And so a little bit in 2022, certainly it could have a little bit of tick in 2023. But for the most part, we're doing all the work now to make sure that we have a major launch or it doesn't impact longer-term growth rates.

[Operator]

And our next question comes from Jayson Bedford from Raymond James. Go ahead, Jayson.

[Jayson Bedford, Analyst at Raymond James]

Good afternoon. Just two questions that require quick answers. Just a clarification. I get the sense that it was a record for new patient starts in both the US and worldwide, if you could just confirm that? And then the second question is, you mentioned expanding the G7 launch in Europe over the coming weeks. And I wasn't clear whether you're going into new countries? Or is this just more expansive in the UK?

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

Yes, this is Kevin, I'll start. Yes, it was record new patients OUS and in our US markets as well. Both teams had new patient add records during this quarter. With respect to the roll out of G7 in Europe, what we had indicated was our first rollout will be in the UK, and we expect we will add other geographies before the end of the year.

[Operator]

And our next question comes from Travis Steed from Bank of America. Go ahead, Travis.

[Travis Steed, Analyst at Bank of America]

Hey, thanks for taking the question. One quick clarification. The pricing mix versus volume growth this quarter. And then as you look ahead to next year, well, we start to see volume and revenue growth to start to match up a bit more. And I'm thinking about the basal opportunity, is that an opportunity where you're going to have to lower price to get the volume? Or is the basal pricing probably pretty similar to the intensive market? Thank you.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Sure. So I can take those questions. In terms of pricing and what I'd say is more channel mix, but the delta between the two, it was about the same this quarter as it was in prior quarter, which is what we had signaled at the start of the year. We still expect to migrate in the US channel as we move more DME to pharmacy, that continues as expected. And then we had the OUS pricing, where we took down pricing in exchange for access. We expected that to run through the end of Q2, before we lapped our strategy. So it's all gone and aligned with expectations. It was right around $70 million on the quarter. In terms of basal and beyond, look, basal coverage, we believe, is out there. In terms of what the pricing is, at this point, a lot of the conversations are about category coverage. And currently, category coverage is already relatively defined, defined in pricing today. And so what that means is it could be the same, but would we be willing to talk to folks about increasing access in exchange for price? We'd absolutely entertain the conversation. It'd have to make sense for us for both the returns that we would expect on our performance as well as for our shareholders, but nothing to this point has indicated it would be lower. However, we understand that as more and more folks get access, we will be having those conversations.

[Operator]

And our next question comes from Marie Thibault from BTIG. Go ahead, Marie.

[Marie Thibault, Analyst at BTIG Research]

Hi, good evening. Thanks for taking the questions. I wanted to go back to something Kevin said earlier about the new software and app experience for the patient with G7 in the US. Can you give us a hint of how meaningful that new app experience might be for patient willingness to try the G7, to switch to the G7, what it might do for patient demand? Thank you.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

One of the best features of the limited launch in the UK has been getting feedback on the software and people absolutely love the app. From the very beginning, when you start, it is much easier to fire it up and get on the system and understand what CGM is going to do for you and how it's going to work. So for a new user, this is a much, much easier experience and much, much easier start. The other thing that's very obvious in the software is another feature that our patients love, it's a 30-minute warm up that actually ends up being about 25 minutes once you put the sensor on. I was speaking with a patient just last week, and I asked her what is your favorite and what is your worst thing about G6? And the two-hour warm-up is very frequently comes up, was what came up. And so this half hour warm-up is going to be a feature. But the software itself in addition to the typical graph in the sense of reading in the arrows, we also have clarity data built into the app that gives you feedback about how you're doing over one day, three days, seven days or even a month. So someone can go down and look and see exactly how they're doing and what their trends are, how much time they are spending in range. So it's much more of a full experience for somebody in their diabetes care and our patients like it tremendously. We'll be ready to go on Android and iOS in launch. We're not going to hold either of them back.

The other thing with the app and it's not really on the app, but it's a feature of this product that's been very well accepted as well. I didn't talk much about. We have a new receiver coming. The patients absolutely have loved and are using it very well. And while I figured when we went to the phone in the beginning, everybody would immediately migrate to the phone. There is a very large percentage of our customers who use that receiver. They will be greatly enhanced in their experience by going to the next receiver with us. And on the good news front as well, that new receiver while a better experience is a much lower cost offering. So I'll get stuck there on the app.

[Operator]

And our next question comes from Mathew Blackman Stifel, Nicolaus]. Go ahead, Mathew.

[Mathew Blackman, Analyst at Stifel Nicolaus]

Good afternoon everybody. Thanks for taking my question. International growth did step up even though you had a tougher comp. Is that the broader G7 rollout? Dexcom ONE? Some combination of those two? And I'm also really curious about Germany, in particular, where I think you are going head-to-head versus the newest sensor from your competitors. Just any commentary about geographic performance within that international number? Thanks.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Sure. Yeah, we can absolutely answer that. And it's interesting, Dexcom ONE and G7 really haven't contributed all that much to this point. So certainly, it's an exciting future contributor, and we're very, very bullish on both G7 and the opportunity in Dexcom ONE. Dexcom ONE really is in the Bell countries and hasn't contributed all that much and G7 was limited launch. And so what you're seeing is G7 with a more meaningful launch and Dexcom ONE with a more meaningful launch in bigger countries in Q3 and beyond. So what you saw in Q2 was really a continuation of our access and going deeper into countries where we had our G Series, and really, it was broad-based. And it's a continuation of broad-based performance outside the US, really across all of our countries, including Germany, where we do go head-to-head with Libre3. And so I think what you can say is that business is doing incredibly well, and there's new catalysts to ultimately support it for upcoming periods. So we are very excited about that international business. And like I said, in countries where we're going up head-to-head with our competitors' most recent product, we continue to do very well and take share. So, very, very bullish on our opportunity going forward.

[Operator]

And our next question comes from Josh Jennings from Cowen. Go ahead, Josh.

[Unidentified Participant, at DexCom]

Hi. This is Brian here for Josh. Are you currently seeking or planning to seek CE Mark approval for the software changes you're making in the US? And if so, could you share the projected time line there? Thanks for taking the question.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

We already have the software approved for CE Mark in Europe, and we do not plan immediately on implementing the changes that we're putting into the US app. We'll consider that over time. We'll -- we have the app and the software configured to whereby we can launch the product with what we're doing in Europe to sell it and support it there. And if we feel the need to in some period of time, we can implement those changes into the other software and upgrade patient's apps on the phone, but not immediately, no.

[Operator]

Our next question comes from Steven Lichtman from Oppenheimer. Go ahead, Steven.

[Steven Lichtman, Analyst at Oppenheimer]

Thank you. Hi, guys. As you're moving G7 to full launch in the UK, where you now also have Dexcom ONE, just wondering how will those two offerings the marketed relative to each other. Should we assume that over time, they sort of merge and with G7 becoming the primary hardware there, obviously, that's going to happen in more and more countries over time. So, wondering if you could talk to your thoughts on that? Thanks.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

No, I appreciate that question. We launched Dexcom ONE in Europe, and we're launching in the UK because there are many reimbursement opportunities. We've not been able to participate in our G Series, or our G6 and G7 products are regarded as very high-end sensors for intensive insulin management, integration with insulin pumps. A lot of pediatrics to share the follow and the other features that have made our products so endeared to our users. The Dexcom ONE app has -- doesn't have many of those features. It's much more simple, and it falls into a different reimbursement category in many of these geographies. In the UK, for example, our Dexcom ONE system will literally be -- will go through the pharmacy channel for broad-based distribution and broad-based accessibility for everybody, whereas our G Series, it requires more documentation, more approval and very specific conditions. As we look at these geographies, we think we have an opportunity with Dexcom ONE to sell a different product and a different system with different features that really won't step over onto our G Series that is fully integrated with other systems and offers all these other features. Ultimately, as I said on the call, we want our Dexcom ONE product to be on the G7 platform as well as we simplify our operating structure over time, but that will take a little while. And so G6 for Dexcom ONE platform, we think will do very well. And our initial user feedback has been very good.

The software for Dexcom ONE, I would also add, has been designed on the same platform as the G7 software. So it looks and feels a little much more like G7 than it does G6. So our users will have a great experience there. As long as there are two reimbursement categories, we do not see these two products coming together from a reimbursement perspective. They might look more like physically and be on the same platform once we get G7 and enough capacity to transfer to the other Dexcom under that platform. But they won't be the same experience, it won't be reimbursed at the same rates.

[Operator]

And our next question comes from Larry Biegelsen from Wells Fargo. Go ahead, Larry.

[Nathan Travis, Analyst at Wells Fargo & Company]

Hi. This is Nathan on for Larry. Can you comment on what drives the margin improvement in the second half, given the launch of G7? And how should we think about margins into 2023? Thanks.

[Jereme Sylvain, Chief Financial Officer at DexCom]

Thanks. Sure. Let me talk about the second half, and we won't get too, too much into 2023 specifically other than we all have -- with our long-range plan is 65%. And so that's the way we generally think about things. In terms of the back half of the year, typically, what happens is as we go typical seasonality as we go through the course of the year, and part of this has to do with who's ultimately purchasing the product, margins typically get better. Now that was thrown on its head a little bit and as we were launching G7, I mean, we had some timing things about when that would launch and what countries that would go into. So what you're finding is, is for the first half of the year, we obviously had a few different unique items that impacted margins. What you're really finding is the run rate for our margin for the first half of the year, absent these was just below 65. Back half of the year, we expect it to be just the opposite, just north of 65 as we hit that typical seasonality. We will have a little bit of pressure from the launch of G7 outside the US. However, that will clearly be offset through the G6 throughput that you ultimately see. And the reason to tick up in the back half of the year in some ways is due to with the G7 launch in a meaningful way outside -- inside the US sliding into Q1 of next year, you do see that performance on that G6 platform, which continues to have nice margins play through over the course of the rest of the year. So we have a lot of confidence, 65% for the year, even despite all of the macroeconomic conditions.

[Operator]

We have no more questions at this time. I'll turn it back to the speakers for closing comments.

[Kevin Sayer, Chairman, President and Chief Executive Officer at DexCom]

Well, again, thanks, everybody, for participating on the call. One of the great things that's happened in the second quarter has been my own ability to get out and talk and meet with people going to ADA and also some other conferences where I've spoken. And I've never seen DexCom more respected and more visible than we are now. Our customer satisfaction scores, as I talked earlier, have never been higher, and that's what you hear in real life. People are absolutely thrilled with the performance of our product and the problem that we solve for them. It's never been a better time here. We have a number of Dexcom ONE launches coming out over the next few quarters on top of that with G7 as well, both presenting great revenue and growth opportunities for us and our operations are running very efficiently and smoothly. Everybody have a great day, and thanks for participating on the call.

[Operator]

[Operator Closing Remarks]