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Dexcom Reports First Quarter 2019 Financial Results

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DexCom, Inc. (NASDAQ:DXCM) today reported its financial results as of
and for the quarter ended March 31, 2019.

First Quarter 2019 Highlights:

  • Revenue grew 52% versus the same quarter of the prior year to $280.5
    million
  • U.S. revenue growth of 45% and international revenue growth of 79%
  • Demonstrated additional real-world clinical benefits driven by Dexcom
    real-time CGM, as described in recent scientific publications:
    • Actionable, predictive low glucose alerts with the Dexcom G6
      enable further reductions in hypoglycemia, independent of screen
      view frequency1
    • Data sharing via Dexcom Share and Follow is associated with
      improved time in range and device utilization in children and
      adolescents with diabetes2

"Dexcom is off to a great start in 2019, with our growth testifying to
the rising awareness and excitement around real-time CGM and Dexcom's
new G6 technology," said Kevin Sayer, Dexcom's Chairman, President and
CEO. "Given the strength of our performance thus far, we are pleased to
raise our full-year growth outlook."

2019 Annual Guidance

Dexcom updated its revenue, gross profit and operating margin
expectations for full fiscal year 2019:

  • Revenue of $1.25 billion to $1.3 billion
  • Gross profit margin of 64% to 65%
  • Non-GAAP operating margin of approximately 6%
  • Non-GAAP adjusted EBITDA margin of approximately 18%

First Quarter 2019 Financial Results

Revenue: In the first quarter of 2019, worldwide revenue grew 52%
to $280.5 million, up from $184.4 million in the first quarter of 2018.
The growth was driven by increasing volumes across all channels in
conjunction with the rising global awareness of the benefits of
real-time CGM.

Gross Profit: Gross profit totaled $168.8 million or 60.2% of
sales for the first quarter of 2019, compared to $118.9 million or 64.5%
of sales in the first quarter of 2018.

Operating Loss: GAAP operating loss for the first quarter of 2019
was $14.4 million, compared to a GAAP operating loss of $30.7 million
for the first quarter of 2018.

Non-GAAP operating loss* for the first quarter of 2019 was $7.6 million,
compared to a non-GAAP operating loss of $28.7 million for the first
quarter of 2018. The first quarter 2019 non-GAAP amount excludes $6.4
million of business transition and related costs and the first quarter
2018 non-GAAP amount excludes $2.0 million of such costs.

Net Loss and Net Loss per Share: GAAP net loss was $26.9 million,
or $0.30 per share, for the first quarter of 2019, compared to a GAAP
net loss of $24.2 million, or $0.28 per share, for the same quarter of
2018.

Non-GAAP net loss* was $4.6 million, or $0.05 per share, for the first
quarter of 2019, compared to a non-GAAP net loss of $26.3 million, or
$0.30 per diluted share, for the same quarter of 2018. The first quarter
2019 non-GAAP amount excludes $6.4 million of business transition costs,
$11.3 million of non-cash interest expense related to Dexcom's senior
convertible notes, and a $4.2 million loss related to equity investments.

Cash and Liquidity: As of March 31, 2019, Dexcom held $1.358
billion in cash and marketable securities and maintained full
availability on its $200.0 million revolving credit facility. The cash
balance includes the net proceeds from Dexcom's fourth quarter 2018
convertible notes offering and represents significant financial and
strategic flexibility as Dexcom continues to expand production capacity
and explore new market opportunities.

* See the tables below for a reconciliation of these GAAP and non-GAAP
financial measures.

1 Puhr S, Derdzinski M, Parker AS, Welsh JB, Price DA.
Real-World Hypoglycemia Avoidance With a Predictive Low Glucose Alert
Does Not Depend on Frequent Screen Views. J Diabetes Sci Technol.
2019:1932296819840691. [publication forthcoming, presented at ATTD in
February 2019]; Puhr S, Derdzinski M, Welsh JB, Parker AS, Walker T,
Price DA. Real-World Hypoglycemia Avoidance with a Continuous Glucose
Monitoring System's Predictive Low Glucose Alert. Diabetes Technol
Ther
. 2019;21(4):155-158. [published online March 30, 2019]

2 Welsh JB, Derdzinski M, Parker AS, Puhr S, Jimenez A,
Walker T. Real-Time Sharing and Following of Continuous Glucose
Monitoring Data in Youth. Diabetes Therapy. 2019;10(2):751-755.
[published online January 30, 2019]

Conference Call

Management will hold a conference call today starting at 4:30 p.m.
(Eastern Time). The conference call will be concurrently webcast. The
link to the webcast will be available on the DexCom, Inc. website at www.dexcom.com
by navigating to "About Us," then "Investor Relations," and then "Events
and Presentations," and will be archived for future reference. To listen
to the conference call, please dial (800) 446-1671 (US/Canada) or (847)
413-3362 (International) and use the confirmation number "47626298"
approximately five minutes prior to the start time.

Statement Regarding Use of Non-GAAP Financial Measures

Dexcom reports non-GAAP financial measures in addition to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. Our financial measures under GAAP include certain
non-cash collaborative research and development fees, business
transition and related costs, income and expense related to our equity
investment in Tandem Diabetes Care, Inc., and certain interest expense
related to our senior convertible notes, as shown in the itemized
reconciliation between GAAP and non-GAAP financial measures included in
this press release. Management believes that presentation of operating
results that excludes these items provides useful supplemental
information to investors and facilitates the analysis of our core
operating results and comparison of operating results across reporting
periods. Management also believes that this supplemental non-GAAP
information is therefore useful to investors in analyzing and assessing
our past and future operating performance.

These non-GAAP measures may be different from non-GAAP measures used by
other companies. In addition, these non-GAAP measures are not based on
any comprehensive set of accounting rules or principles. We believe that
non-GAAP measures have limitations in that they do not reflect all of
the amounts associated with our results of operations as determined in
accordance with U.S. GAAP and that these measures should only be used to
evaluate our results of operations in conjunction with the corresponding
GAAP measures. We encourage investors to carefully consider our results
under GAAP, as well as our supplemental non-GAAP information and the
reconciliation between these presentations, to more fully understand our
business.

About DexCom, Inc.

DexCom, Inc., headquartered in San Diego, California, is developing and
marketing continuous glucose monitoring systems for use by people with
diabetes and by healthcare providers.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements that are not
purely historical regarding Dexcom's or its management's intentions,
beliefs, expectations and strategies for the future. All forward-looking
statements and reasons why results might differ included in this press
release are made as of the date of this release, based on information
currently available to Dexcom, deal with future events, are subject to
various risks and uncertainties, and actual results could differ
materially from those anticipated in those forward-looking statements.
The risks and uncertainties that may cause actual results to differ
materially from Dexcom's current expectations are more fully described
in Dexcom's Annual Report on Form 10-K for the period ended December 31,
2018, as filed with the Securities and Exchange Commission on
February 21, 2019. Except as required by law, Dexcom assumes no
obligation to update any such forward-looking statement after the date
of this report or to conform these forward-looking statements to actual
results.

       

DexCom, Inc.

Table A

Consolidated Balance Sheets

(In millions, except par value and share data)

 

March 31,
2019

December 31,
2018

Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 1,285.1 $ 1,137.0
Short-term marketable securities 72.9 248.6
Accounts receivable, net 204.7 226.7
Inventory 101.1 70.7
Prepaid and other current assets   27.0     16.5  
Total current assets 1,690.8 1,699.5
Property and equipment, net 221.4 183.1
Operating lease right-of-use assets 27.7
Goodwill 18.6 18.7
Other assets   15.5     14.7  
Total assets $ 1,974.0   $ 1,916.0  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 169.1 $ 147.1
Accrued payroll and related expenses 51.3 72.4
Operating lease liabilities, current portion 12.3
Deferred revenue   2.7     2.9  
Total current liabilities 235.4 222.4
Long-term senior convertible notes 1,022.4 1,010.3
Operating lease liabilities, net of current portion 29.5
Other long-term liabilities   18.1     20.0  
Total liabilities   1,305.4     1,252.7  
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5.0 million shares authorized; no
shares issued and outstanding at March 31, 2019 and December 31, 2018
Common stock, $0.001 par value, 200.0 million shares authorized;
92.1 million and 91.0 million shares issued and outstanding,
respectively, at March 31, 2019; and 91.1 million and 90.0 million
shares issued and outstanding, respectively, at December 31, 2018
0.1 0.1
Additional paid-in capital 1,590.6 1,560.6
Accumulated other comprehensive income 1.6 1.5
Accumulated deficit (823.7 ) (798.9 )
Treasury stock, at cost; 0.8 million shares at March 31, 2019 and
December 31, 2018
  (100.0 )   (100.0 )
Total stockholders' equity   668.6     663.3  
Total liabilities and stockholders' equity $ 1,974.0   $ 1,916.0  
 
   

DexCom, Inc.

Table B

Consolidated Statements of Operations

(In millions, except per share data)

(Unaudited)

 
Three Months Ended
March 31,
  2019         2018  
 
Revenue $ 280.5 $ 184.4
Cost of sales   111.7     65.5  
Gross profit 168.8 118.9
Operating expenses
Research and development 59.0 44.8
Selling, general and administrative   124.2     104.8  
Total operating expenses   183.2     149.6  
Operating loss (14.4 ) (30.7 )
Interest expense (14.9 ) (4.8 )
Income (loss) from equity investments (4.2 ) 7.4
Interest and other income (expense), net   6.9     4.1  
Loss before income taxes (26.6 ) (24.0 )
Income tax expense   0.3     0.2  
Net loss $ (26.9 ) $ (24.2 )
 
Basic and diluted net loss per share $ (0.30 ) $ (0.28 )
Shares used to compute basic and diluted net loss per share   90.3     87.3  
 
   

DexCom, Inc.

Table C

Revenue by Geography

(Dollars in millions)

(Unaudited)

 
Three Months Ended
March 31,
  2019         2018  
U.S. revenue $ 210.5 $ 145.4
Year over year growth 45 % 25 %
% of total revenue 75 % 79 %
 
International revenue $ 70.0 $ 39.0
Year over year growth 79 % 49 %
% of total revenue 25 % 21 %
 
Total revenue (1) $ 280.5 $ 184.4
Year over year growth 52 % 30 %
 
(1)The sum of the revenue components may not equal total
revenue due to rounding.
 
   

DexCom, Inc.

Table D

Revenue by Component

(Dollars in millions)

(Unaudited)

 
Three Months Ended
March 31,
  2019         2018  
Sensor and other revenue(2) (3) $ 211.9 $ 131.9
Year over year growth 61 % 30 %
% of total revenue 76 % 72 %
 
Transmitter revenue(2) $ 49.6 $ 37.7
Year over year growth 32 % 28 %
% of total revenue 18 % 20 %
 
Receiver revenue $ 19.0 $ 14.8
Year over year growth 28 % 25 %
% of total revenue 7 % 8 %
 
Total revenue(1) $ 280.5 $ 184.4
Year over year growth 52 % 30 %
 

(1) The sum of the revenue components may not equal
total revenue due to rounding.

(2) Includes allocated subscription revenue.
(3) Includes services, freight, accessories, etc.
 
   

DexCom, Inc.

Table E

Itemized Reconciliation Between GAAP and Non-GAAP Financial
Measures

(In millions, except per share data)

(Unaudited)

 
Three Months Ended
March 31,
  2019      

2018
(As Adjusted)(1)

GAAP operating loss $ (14.4 ) $ (30.7 )
Amortization of intangible assets 0.4
Business transition and related costs(2)   6.4     2.0  
Non-GAAP operating loss $ (7.6 ) $ (28.7 )
 
GAAP net loss $ (26.9 ) $ (24.2 )
Share-based compensation 25.0 24.6
Depreciation and amortization 9.9 6.0
Business transition and related costs(2) 6.1 2.0

(Income) loss from equity investments(3)

4.2 (7.4 )
Interest expense and interest income 7.5 3.3
Income tax expense   0.3     0.2  
Non-GAAP adjusted EBITDA $ 26.1   $ 4.5  
 
GAAP net loss $ (26.9 ) $ (24.2 )
Amortization of intangible assets 0.4
Business transition and related costs(2) 6.4 2.0
Non-cash interest expense(4) 11.3 3.3

(Income) loss from equity investments(3)

4.2 (7.4 )
Tax effect of adjustments(4)        
Non-GAAP net loss $ (4.6 ) $ (26.3 )
 
GAAP basic and diluted net loss per share $ (0.30 ) $ (0.28 )
Amortization of intangible assets
Business transition and related costs(2) 0.07 0.02
Non-cash interest expense(4) 0.13 0.04

(Income) loss from equity investments(3)

0.05 (0.08 )
Tax effect of adjustments(5)        
Non-GAAP basic and diluted net loss per share(6) $ (0.05 ) $ (0.30 )
 
Shares used to compute basic and diluted net loss per share   90.3     87.3  
 
(1) The 2018 non-GAAP presentation is adjusted to include
amortization of intangible assets and business transition and
related costs to conform to the 2019 presentation.
(2) Business transition costs are primarily related to
the activities that DexCom announced on February 21, 2019.

(3) (Income) loss from equity investments is related to
our investment in Tandem Diabetes Care, Inc.

(4) Non-cash interest expense represents accretion of the
debt discount associated with our 2022 and 2023 Senior Convertible
Notes.
(5) We are tax-effecting GAAP-only items at a 0% tax rate
because we record a full valuation allowance on our deferred tax
assets.

(6) The sum of the basic and diluted non-GAAP net
income (loss) per share components may not equal the totals due to
rounding.

 

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