DexCom, Inc.

Ladies and gentlemen, welcome to the Dexcom third quarter 2024 earnings release conference call. My name is Abby and I will be your operator for today's call. At this time, all participants are in a listen only mode and later we will conduct a question and answer session. During the question and answer session, if you have a question, please press star one on your touch tone phone. As a reminder, the conference is being recorded. And I will now turn the call over to Shawn Christensen, Vice President, Finance and Investor Relations. Mr. Christensen, you may begin.

Thank you, Abby, and welcome to Dexcom's third quarter 2024 earnings call. Our agenda begins with Kevin Sayre, 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 third quarter 2024 performance on the Dexcom Investor Relations website on the events and presentations page. 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-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 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 third quarter earnings call for reconciliation of these measures to their most directly comparable GAAP financial measure. Now, I will turn it over to Kevin.

Thank you, Sean, and thank you everyone for joining us. Before we dive in, I want to take this opportunity to share an important update. As many of you saw in today's press release, our Chief Commercial Officer, Terri Lauver, has expressed her plans to retire from Dexcom. Terri is a great leader who's advanced our commercial organization in several areas in the past two years, including the launches of our G7 system and Celo, which I will touch on shortly. I am thankful for her strong leadership and dedication to Dexcom, and she will continue to work with me as a special advisor and consultant through early next year as we navigate the transition and our search for a new chief commercial officer. I will assume leadership of the team, and having managed this team before, I can speak to their quality and look forward to leading them again. There are three primary takeaways I want to convey today, reinforced by what I've observed since our last quarter call. First, CGM remains a premier global growth category, and the excitement and uptake we've seen with the Stella launch has further reinforced my conviction about the long-term potential of this market. Second, I feel good about the execution progress that our team is making, both in terms of our commercial effectiveness and our product pipeline, and we'll walk through some of those steps today. And finally, I feel confident in our pathway back to higher growth and continued margin expansion, which Jeremy will discuss in more detail later. With those points as a framework for discussion, let's turn to the highlights from the quarter. Today, we reported third quarter organic revenue growth of 3% compared to the third quarter of 2023, which came in at the high end of our third quarter guidance. Our team continues to build upon our foundation for long-term growth by delivering new products and customer experiences while swiftly working through the temporary challenges to get us back on track. I want to touch on the action items we implemented in the third quarter and the strong progress we've made on the core issues identified. Together, these updates demonstrate that we are rebuilding momentum to solidify our growth as we head into 2025. Beginning with our U.S. Salesforce expansion, we are pleased to report progress and positive momentum as we move to apply learnings from the initial rollout and improve our commercial execution. As we anticipated, our productivity metrics improved over the course of the third quarter as we implemented several changes to strengthen our sales effectiveness. Importantly, new customer starts returned to record levels in the third quarter as we gained greater traction in new and existing physician offices. We are now encouraged to report that since the expansion of the sales force in April, we have seen our prescriber base expand by nearly 35,000 clinicians. While the impact of these new relationships is not fully reflected in our third quarter results, they represent a meaningful expansion in a few short months and set us up very well as we work to build on this momentum in Q4 and into 2025. Regarding our DME partnerships, we have worked quickly to refocus on those partnerships and ensure that our teams are aligned to the strategic importance of all channels in the U.S. Our leadership connected with our counterparts at the DME distributors in the last quarter to listen and collaborate on strategies that are mutually beneficial. Through this process, we found opportunities to better partner with these teams in the field as we collectively simplify workflows and provide a greater customer experience for all. While we still have work to do, we're in a far better position today than we were three months ago. These partnerships are a core part of our strategy, and we are confident in our ability to drive meaningful growth that accrues to both us and these channel partners. We've also executed at a high level within our international markets. We saw third quarter revenue growth accelerate from the second quarter levels in nearly all of our direct markets, driven by stronger new patient performance and the expanded availability of our G7 and Dexcom 1 Plus product platforms. This included the launch of G7 in Australia at the end of September, bringing our latest G-Series technology to our customers who have been eagerly awaiting its arrival. And we continued the expansion of our Dexcom One Plus system, which leverages our G7 hardware platform with a differentiated app experience. We've now introduced this technology in 19 countries, with France being the latest addition in the third quarter, in advance of the start of national reimbursement, including Basel coverage in early October. This provides reimbursed access to more than 600,000 people in this important market. We also saw Japan return to growth in the third quarter, with our new sales organization gaining momentum in this critical market. While it is not yet a large component of our international revenue, our team is making strong inroads with the clinical community and building awareness among the more than 1 million potential customers who have access to Dexcom CGM. In fact, we recently delivered our highest new customer start month since entering Japan in 2019, and we've lived on this progress in the coming quarters and years ahead. During the quarter, we were also thrilled to launch our newest product, Stello, in the U.S. market. Stella's launch represented a pivotal moment in the diabetes care and metabolic health landscape as now any adult in the U.S. can access a Dexcom biosensor. It also provides a glimpse into the future of the broader care paradigm as more personalized solutions can encourage better lifestyle management and enable clinicians to make more informed therapy decisions. We are already hearing this exact feedback from our earliest adopters. Many of these individuals are engaging with their glucose data for the first time and sharing stories of how Stello has changed their behavior and provided greater accountability in their lives. They're also sharing positive feedback on all stages of the product experience. Everything from ordering through our e-commerce platform, the speed of delivery by Amazon Fulfillment, engagement with the software interface, and a seamless reordering process through our subscription model. And in Dexcom tradition, we are listening to customers and are already working to innovate the Stello experience and meet the distinct needs of people with prediabetes or type 2 diabetes who are not on insulin. Even with the product being targeted to those populations, we've seen plenty of inbound interest for people looking to take advantage of the OTC opportunity early in their metabolic health journey. Across these cohorts, currently around half of our customers have signed up for a Celo subscription, which is encouraging to see this early in a product launch. We have historically found that greater CGM usage can lead to improved health outcomes, and we'll be tracking this closely as the market further develops. In October, we also began our initial expansion of distribution options for Celo. To start, we've broadened our sales presence and increased our partnerships by providing several of our core DME partners access to Stello on their platforms. This gives them yet another great product to engage and more fully broadly serve the diabetes community. We've also initiated our first B2B sales of Stello. This includes direct sales to certain clinicians as one of the first requests that we heard at the outset of Stello's launch was the desire from clinicians to have Stello available for sale within their practices. We've been very encouraged by Stella's launch thus far, and this is only the beginning. Stella will continue to adapt and evolve as we incorporate functionality that personalizes the experience for our customers. Finally, our team is always working to enhance customer experience across our platforms, and we recently took another exciting step forward on this journey. Following the completion of the necessary clinical work, we submitted our Dexcom G7 15-day CGM system to the FDA for review. This has been a top priority across the organization, and we're looking forward to bringing this product to market as soon as possible. We will have more to discuss around this product and its commercial rollout in the months ahead. In summary, the team has worked tirelessly to respond to the dynamics that emerged earlier this year. We're moving quickly and putting in place the pieces to help us return to the growth levels we expect from ourselves. And just as important, even as we work through these near-term dynamics, we continue to manage this business for the long term. With that, I'll turn it over to Jeremy.