DexCom, Inc.

Welcome to the Dexcom fourth quarter and full year 2018 earnings release call. My name is Adrienne and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session. During the question and answer session, if you have a question, please press star, then one on your touchtone phone. Please note, this conference is being recorded. I'll now turn the call over to Matt Dolan, Vice President, Corporate Development. Please go ahead, sir.

Thank you, operator, and welcome to Dexcom's fourth quarter 2018 earnings call. We will begin our prepared remarks with Kevin Sayre, Dexcom's chairman, president, and CEO, who will provide a summary of the quarter and fiscal year. This will be followed by a review of our financials and 2019 outlook from Quentin Blackford, our executive vice president and CFO, and then a strategic update from Steve Pacelli, our executive vice president of strategy and corporate development. Following our prepared remarks, we will open up the call for your questions. At that time, we ask analysts to limit themselves to one question and a follow-up so we can provide an opportunity for everyone today. With that, let's review our safe harbor statement. Some of the statements that 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 and are subject to various risks and uncertainties, and actual results can 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, quarterly reports 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 results. 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 investor relations portion of our website for reconciliation of these measures to their most directly comparable GAAP financial measure. Now I will turn it over to Kevin.

Thank you for joining us today as we discuss our year-end results. Simply put, 2018 was an incredible year for Dexcom on several fronts. First and foremost, we broke through $1 billion in annual revenue. Very few, if any, medical device companies have reached the billion-dollar revenue mark while growing revenues organically at greater than 40% year-over-year. Clearly, the fourth quarter exceeded our expectations, delivering growth of over 50% compared to the same period a year ago. The company also posted its most profitable non-GAAP fourth quarter and full year on record, as we continue to focus on growth while demonstrating leverage. Beyond the numbers, we received FDA approval for our G6 system in late March, with G6 becoming a Class II system and being the first to meet the agency's newly established special controls for ICGM. We launched G6 in the U.S. around mid-year and continue to roll it out to additional markets globally. Initial patient feedback for G6 has been outstanding. G6 has truly redefined best-in-class CGM and provides us with a platform that we believe will drive continued growth opportunities for Dexcom. Beyond G6, we saw significant increases in adoption in both the Medicare and international markets, both of which remain significantly underpenetrated. We advanced our interoperability and decision support initiatives, including the acquisition of Type 0. And we solidified our product pipeline by amending our agreement with Verily and strengthened our balance sheet with the convertible note financing that we did late in the fourth quarter. All of these accomplishments have positioned us for continued success in 2019 and beyond. The team at Dexcom has worked incredibly hard for these achievements, and I must recognize all of the effort needed to make this happen. The organization is achieving milestones that few companies ever do, which is gratifying and comes with significant dedication and determination from our team. But going forward, that will not be enough. We must put the infrastructure in place for this business to scale to its full potential. This need, in part, drove the additional announcement that we made today. In light of our meaningful uptick in demand, we have set the aggressive internal goal to double our G6 production capacity by year end. We need to expand our footprint dedicated to manufacturing within the Arizona facility, both to meet our G6 goals and in anticipation of a late 2020 launch of G7. Similar to our scaling of manufacturing capacity, we have had to rethink how we build our customer-facing infrastructure to better serve our rapidly growing patient base, not just for today, but also to build a sustainable infrastructure for the future. We have therefore expanded and reorganized our customer support efforts, which includes an increase of resources on our new Philippines location, as well as outsourcing other functions through third parties. This move will provide the ability to serve our customers with the same high level of quality that they have become accustomed to and grow in a much more efficient manner. This expansion will result in organizational changes, including a reduction in certain staff at both our San Diego and Arizona facilities and despite an expected overall increase in employee numbers in these locations this year. These types of decisions are always difficult, as we have had to increase our support staff significantly over the past several years and have relied on such individuals to meet the demand of our customers. This is a necessary step to continue to adapt and further differentiate our business by maintaining our focus on the patient experience. These changes will occur during a transition period, and we have taken the necessary steps to ensure that they occur as seamlessly as possible while being open with our employees and supporting those impacted over the next several months. Quinton will walk you through the financial implications of this effort. To sum up, Dexcom continues to deliver strong results, and our recent initiatives leave us well-positioned to execute over the next several years. I will now turn the call over to Quinton for a financial update.