DexCom, Inc. (Nasdaq: DXCM) today reported its financial results
as of and for the quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights:
- Revenue grew 26% versus the same quarter of the prior year to
$500.9 million
- U.S. revenue growth of 29% and international revenue growth of
17%
- GAAP operating income of $94.1 million or 18.8% of revenue, an
increase of 470 basis points compared to the third quarter of 2019.
Non-GAAP operating income* of $95.0 million or 19.0% of revenue, an
increase of 410 basis points over the same quarter of the prior
year
Strategic Highlights:
- Established the first-ever registry dedicated to tracking
outcomes of in-hospital real-time CGM use in response to the
COVID-19 pandemic
- Initiated the Patient Assistance Program to assist current U.S.
customers who have lost their health insurance coverage as a result
of the impact of the COVID-19 pandemic
- After the conclusion of the quarter, announced a joint program
with Eli Lilly and Company for U.S. healthcare providers about
Lilly's new rapid-acting mealtime insulin Lyumjev™ and Dexcom G6
CGM systems
“The third quarter was another strong period of growth for
Dexcom as awareness of our technology continues to grow in this
time of heightened focus on glycemic health,” said Kevin Sayer,
Dexcom’s chairman, president and CEO. “We are once again pleased to
raise our full-year 2020 guidance as our teams press forward to
close the year strong and execute on our strategic
initiatives.”
2020 Annual Guidance
The company is updating guidance for fiscal year 2020 revenue,
gross profit, operating margin, and Adjusted EBITDA margin as
follows:
- Revenue of approximately $1.900 billion (29% growth)
- Non-GAAP Gross profit margin to meet or exceed 66%
- Non-GAAP Operating margin to meet or exceed 16%
- Adjusted EBITDA margin to meet or exceed 26%
Third Quarter 2020 Financial Results
Revenue: In the third quarter of 2020, worldwide revenue
grew 26% to $500.9 million, up from $396.3 million in the third
quarter of 2019. Volume growth in conjunction with strong new
patient additions continues to be the primary driver of revenue
growth as awareness of real-time CGM increases.
Gross Profit: GAAP gross profit totaled $340.4 million or
68.0% of sales for the third quarter of 2020, compared to $246.9
million or 62.3% of sales in the third quarter of 2019. Non-GAAP
gross profit* totaled $340.7 million or 68.0% of sales for the
third quarter of 2020, compared to $246.9 million or 62.3% of sales
in the third quarter of 2019.
Operating Income: GAAP operating income for the third
quarter of 2020 was $94.1 million, compared to a GAAP operating
income of $56.0 million for the third quarter of 2019.
Non-GAAP operating income* for the third quarter of 2020 was
$95.0 million, compared to non-GAAP operating income of $59.1
million for the third quarter of 2019. The third quarter 2019
non-GAAP amount excludes $2.8 million of business transition and
related costs.
Net Income and Net Income per Share: GAAP net income was
$72.2 million, or $0.73 per diluted share, for the third quarter of
2020, compared to a GAAP net income of $45.8 million, or $0.50 per
diluted share, for the same quarter of 2019.
Non-GAAP net income* was $93.6 million, or $0.94 per diluted
share, for the third quarter of 2020, compared to non-GAAP net
income of $60.4 million, or $0.65 per diluted share, for the same
quarter of 2019. The third quarter 2020 non-GAAP amount excludes
$20.0 million of non-cash interest expense related to Dexcom’s
senior convertible notes. The third quarter 2019 non-GAAP amount
excludes $11.5 million of non-cash interest expense related to
Dexcom’s senior convertible notes and $2.8 million of business
transition and related costs.
Cash and Liquidity: As of September 30, 2020, Dexcom held
$2.60 billion in cash and marketable securities and our revolving
credit facility remains undrawn. The cash balance represents
significant financial and strategic flexibility as Dexcom continues
to expand production capacity and explore new market
opportunities.
* See Table E below for a reconciliation of these GAAP and
non-GAAP financial measures.
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
Investor Relations website at investors.dexcom.com by navigating to
“Events and Presentations,” and will be archived for future
reference. To listen to the conference call, please dial (800)
447-0521 (US/Canada) or (847) 413-3238 (International) and use the
confirmation number “49260065” approximately five minutes prior to
the start time.
Statement Regarding Use of Non-GAAP Financial
Measures
This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures, including the reasons management uses each measure, and
reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures prepared in accordance with
Generally Accepted Accounting Principles (GAAP), please see the
section of the accompanying tables titled “About Non-GAAP Financial
Measures” as well as the related Table E.
About DexCom, Inc.
Dexcom, Inc. empowers people to take control of diabetes through
innovative continuous glucose monitoring (CGM) systems.
Headquartered in San Diego, California, Dexcom has emerged as a
leader of diabetes care technology. By listening to the needs of
users, caregivers, and providers, Dexcom simplifies and improves
diabetes management around the world.
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,
including statements with respect to the impacts of the COVID-19
pandemic on Dexcom and our outlook for the full year 2020. 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 Quarterly
Report on Form 10-Q for the period ended September 30, 2020, as
filed with the Securities and Exchange Commission on October 27,
2020. 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)
September 30,
2020
December 31,
2019
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
673.5
$
446.2
Short-term marketable securities
1,930.3
1,087.1
Accounts receivable, net
370.0
286.3
Inventory
200.7
119.8
Prepaid and other current assets
62.6
30.0
Total current assets
3,237.1
1,969.4
Property and equipment, net
461.8
321.3
Operating lease right-of-use assets
94.3
71.5
Goodwill
19.0
18.6
Other assets
21.0
14.2
Total assets
$
3,833.2
$
2,395.0
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
397.0
$
256.4
Accrued payroll and related expenses
92.1
88.5
Short-term operating lease liabilities
15.8
13.6
Deferred revenue
1.5
1.7
Total current liabilities
506.4
360.2
Long-term senior convertible notes
1,645.8
1,059.7
Long-term operating lease liabilities
103.2
72.4
Other long-term liabilities
78.5
20.1
Total liabilities
2,333.9
1,512.4
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0
million shares authorized; no shares issued and outstanding at
September 30, 2020 and December 31, 2019
—
—
Common stock, $0.001 par value, 200.0
million shares authorized; 96.8 million and 96.0 million shares
issued and outstanding, respectively, at September 30, 2020; and
92.4 million and 91.6 million shares issued and outstanding,
respectively, at December 31, 2019
0.1
0.1
Additional paid-in capital
2,153.7
1,675.9
Accumulated other comprehensive income
2.8
2.3
Accumulated deficit
(557.3
)
(695.7
)
Treasury stock, at cost; 0.8 million
shares at September 30, 2020 and December 31, 2019
(100.0
)
(100.0
)
Total stockholders’ equity
1,499.3
882.6
Total liabilities and stockholders’
equity
$
3,833.2
$
2,395.0
DexCom, Inc.
Table B
Consolidated Statements of
Operations
(In millions, except per share
data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenues
$
500.9
$
396.3
$
1,357.8
$
1,013.2
Cost of sales
160.5
149.4
476.8
391.0
Gross profit
340.4
246.9
881.0
622.2
Operating expenses:
Research and development
87.7
66.7
240.7
194.7
Selling, general and administrative
158.6
124.2
444.8
386.7
Total operating expenses
246.3
190.9
685.5
581.4
Operating income
94.1
56.0
195.5
40.8
Interest expense
(24.4
)
(15.1
)
(60.1
)
(45.0
)
Loss on extinguishment of debt
(0.5
)
—
(5.9
)
—
Loss from equity investments
—
—
—
(4.2
)
Interest and other income, net
5.9
4.9
14.2
18.3
Income before income taxes
75.1
45.8
143.7
9.9
Income tax expense
2.9
—
5.3
1.5
Net income
$
72.2
$
45.8
$
138.4
$
8.4
Basic net income per share
$
0.75
$
0.50
$
1.48
$
0.09
Shares used to compute basic net income
per share
95.8
91.3
93.8
90.9
Diluted net income per share
$
0.73
$
0.50
$
1.43
$
0.09
Shares used to compute diluted net income
per share
99.5
92.5
96.9
92.2
DexCom, Inc.
Table C
Revenue by Geography
(Dollars in millions)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
U.S. revenue
$
398.6
$
308.8
$
1,058.0
$
785.6
Year over year growth
29
%
53
%
35
%
46
%
% of total revenue
80
%
78
%
78
%
78
%
International revenue
$
102.3
$
87.5
$
299.8
$
227.6
Year over year growth
17
%
36
%
32
%
46
%
% of total revenue
20
%
22
%
22
%
22
%
Total revenue (1)
$
500.9
$
396.3
$
1,357.8
$
1,013.2
Year over year growth
26
%
49
%
34
%
46
%
(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
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Sensor and other revenue (1) (2)
$
406.3
$
317.2
$
1,095.8
$
789.5
Year over year growth
28
%
64
%
39
%
56
%
% of total revenue
81
%
80
%
81
%
78
%
Hardware revenue (1)(3)
$
94.6
$
79.1
$
262.0
$
223.7
Year over year growth
20
%
9
%
17
%
19
%
% of total revenue
19
%
20
%
19
%
22
%
Total revenue (4)
$
500.9
$
396.3
$
1,357.8
$
1,013.2
Year over year growth
26
%
49
%
34
%
46
%
(1) Includes allocated subscription revenue. (2) Includes
services, freight, accessories, etc. (3) Includes transmitter and
receiver revenue. (4) The sum of the revenue components may not
equal total revenue due to rounding.
DexCom, Inc.
Table E
Itemized Reconciliation
Between GAAP and Non-GAAP Financial Measures
(In millions, except per share
data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
GAAP gross profit
$
340.4
$
246.9
$
881.0
$
622.2
COVID-19 costs (1)
0.3
—
8.1
—
Non-GAAP gross profit
$
340.7
$
246.9
$
889.1
$
622.2
GAAP operating income
$
94.1
$
56.0
$
195.5
$
40.8
Amortization of intangible assets
0.7
0.3
1.9
1.0
Business transition and related costs
(2)
0.1
2.8
0.4
15.9
COVID-19 costs (1)
0.1
—
11.1
—
Litigation settlement costs (3)
—
—
6.1
—
Non-GAAP operating income
$
95.0
$
59.1
$
215.0
$
57.7
GAAP net income
$
72.2
$
45.8
$
138.4
$
8.4
Business transition and related costs
(2)
0.1
1.7
0.4
13.4
COVID-19 costs (1)
0.1
—
11.1
—
Depreciation and amortization
18.4
12.9
46.7
34.4
Litigation settlement costs (3)
—
—
6.1
—
Loss on extinguishment of debt (5)
0.5
—
5.9
—
Loss from equity investments (6)
—
—
—
4.2
Share-based compensation
30.7
24.4
85.3
79.1
Interest expense and interest income
22.0
7.7
48.1
23.5
Income tax expense
2.9
—
5.3
1.5
Adjusted EBITDA
$
146.9
$
92.5
$
347.3
$
164.5
GAAP net income
$
72.2
$
45.8
$
138.4
$
8.4
Amortization of intangible assets
0.7
0.3
1.9
1.0
Business transition and related costs
(2)
0.1
2.8
0.4
15.9
COVID-19 costs (1)
0.1
—
11.1
—
Litigation settlement costs (3)
—
—
6.1
—
Non-cash interest expense (4)
20.0
11.5
48.3
34.1
Loss on extinguishment of debt (5)
0.5
—
5.9
—
Loss from equity investments (6)
—
—
—
4.2
Tax effect of adjustments (7)
—
—
—
—
Non-GAAP net income
$
93.6
$
60.4
$
212.1
$
63.6
GAAP diluted net income per
share
$
0.73
$
0.50
$
1.43
$
0.09
Amortization of intangible assets
0.01
—
0.02
0.01
Business transition and related costs
(2)
—
0.03
—
0.17
COVID-19 costs (1)
—
—
0.11
—
Litigation settlement costs (3)
—
—
0.06
—
Non-cash interest expense (4)
0.20
0.12
0.50
0.37
Loss on extinguishment of debt (5)
0.01
—
0.06
—
Loss from equity investments (6)
—
—
—
0.05
Tax effect of adjustments (7)
—
—
—
—
Non-GAAP net income per share
(8)
$
0.94
$
0.65
$
2.19
$
0.69
Shares used in GAAP diluted per share
calculations
99.5
92.5
96.9
92.2
Shares used in non-GAAP per share
calculations
99.5
92.5
96.9
92.2
(1) Represents costs associated with the COVID-19 outbreak
related to taking the necessary precautions for essential personnel
to operate safely both in person as well as remotely. (2) Business
transition costs are primarily related to the Restructuring Plan
that DexCom announced on February 21, 2019. (3) Represents costs
associated with a settlement of litigation and proceedings related
to a patent infringement lawsuit. (4) Non-cash interest expense
represents accretion of the debt discount associated with our
senior convertible notes. (5) Loss on extinguishment of debt is
related to the repurchase and conversions of our Senior Convertible
Notes due 2022. (6) Loss from equity investments is related to our
investment in Tandem Diabetes Care, Inc. (7) We are tax-effecting
GAAP-only items at a 0% tax rate because we record a full valuation
allowance on our deferred tax assets. (8) The sum of the non-GAAP
net income per share components may not equal the totals due to
rounding.
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated October 27, 2020 contains
non-GAAP financial measures. Table E reconciles the non-GAAP
financial measures in that press release to the most directly
comparable financial measures prepared in accordance with Generally
Accepted Accounting Principles (GAAP). These non-GAAP financial
measures include non-GAAP gross profit, non-GAAP operating income
(loss), non-GAAP net income (loss), and non-GAAP net income (loss)
per share as well as adjusted EBITDA.
Dexcom reports non-GAAP financial measures in addition to, and
not as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. These non-GAAP
financial measures are not based on any comprehensive set of
accounting rules or principles, differ from GAAP measures with the
same names, and may differ from non-GAAP financial measures with
the same or similar names that are used by other companies. We
believe that non-GAAP financial measures should only be used to
evaluate our results of operations in conjunction with the
corresponding GAAP financial measures. We encourage investors to
carefully consider our results under GAAP, as well as our
supplemental non-GAAP information and the reconciliations between
these presentations, to more fully understand our business.
We compute non-GAAP financial measures using the same consistent
method from quarter to quarter and year to year. We may consider
whether other significant items that arise in the future should be
excluded from our non-GAAP financial measures.
We exclude the following items from non-GAAP gross profit:
We exclude the following items from non-GAAP operating
income:
- Amortization of intangible assets
- Collaborative research and development fees
- Business transition and related costs
- COVID-19 costs
- Litigation settlement costs
In addition to the items listed above, we exclude the following
items from non-GAAP net income and non-GAAP net income per
share:
- Non-cash interest expense on senior convertible notes
- Loss on extinguishment of debt
- Income and loss from equity investments
- Income tax effects of non-GAAP adjustments
We believe that presentation of financial results that exclude
these items provides useful supplemental information to investors
and facilitates the analysis of our core operating results as well
as comparison of operating results across reporting periods. Our
non-GAAP financial measures exclude amounts that we do not consider
part of ongoing operating results when planning and forecasting and
when assessing the performance of the organization and our senior
management.
The following are descriptions of the items we exclude from
non-GAAP gross profit, non-GAAP operating income, non-GAAP net
income, and non-GAAP net income per share.
Amortization of intangible assets. When we acquire an entity, we
are required by GAAP to record the fair values of the intangible
assets of the entity on our balance sheet and amortize them over
their useful lives. We exclude these non-cash amortization charges
from our non-GAAP financial measures.
Collaborative research and development fees. Represents
milestone and incentive payments under our collaborative research
and development arrangement. We may elect to pay these fees by
issuing shares of our common stock, and when we do so we exclude
these non-cash fees from our non-GAAP financial measures.
Business transition and related costs. Represents costs
associated with acquisition, integration and business transition
activities, including severance, relocation, consulting, leasehold
exit costs, third party merger and acquisition costs, and other
costs directly associated with such activities. We exclude business
transition and related costs from our non-GAAP financial measures
because they are unrelated to our ongoing business operating
results.
COVID-19 costs. Represents costs associated with the COVID-19
outbreak related to taking the necessary precautions for essential
personnel to operate safely both in person as well as remotely.
Cost incurred include items like incremental payroll costs,
consulting support, IT infrastructure and facilities related costs.
We exclude these costs from our non-GAAP financial measures because
they are unrelated to our ongoing business operating results.
Litigation settlement costs. Represents costs associated with
the settlement of litigation and proceedings related to a patent
infringement lawsuit. We exclude significant one-time litigation
settlement charges and related costs when evaluating our operating
performance because we do not incur such charges on a predictable
basis and exclusion of such charges enables more consistent
evaluation of our operating performance.
Non-cash interest expense on senior convertible notes.
Represents the accretion of the debt discount associated with our
senior convertible notes. We exclude these non-cash interest
expenses from our non-GAAP financial measures.
Loss on extinguishment of debt. Represents losses associated
with repurchases and/or conversions of our senior convertible
notes. We exclude these losses from our non-GAAP financial measures
because they are unrelated to our ongoing business operating
results.
Income and loss from equity investments. Income and loss from
equity investments is related to our investment in Tandem Diabetes
Care. We exclude income and loss from equity investments from our
non-GAAP financial measures because they are unrelated to our
ongoing business operating results.
Income tax effects of non-GAAP adjustments. We currently reflect
no income tax effects for our non-GAAP adjustments because we
record a full valuation allowance on our deferred tax assets.
Adjusted EBITDA excludes non-cash operating charges for
share-based compensation and depreciation and amortization as well
as non-operating items such as interest income, interest expense,
loss on extinguishment of debt, income and loss from equity
investments, and income tax expense. For the reasons explained
above, adjusted EBITDA also excludes non-cash collaborative
research and development fees, business transition and related
costs, COVID-19 costs, and litigation settlement costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201027005812/en/
INVESTOR RELATIONS CONTACT: Steven R. Pacelli Executive Vice
President, Strategy and Corporate Development (858) 200-0200
www.dexcom.com
MEDIA CONTACT: James McIntosh (619) 884-2118
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