dxcm-20220331false2022Q1000109355712/310.00608690.00166550.00237320.500010935572022-01-012022-03-3100010935572022-04-21xbrli:shares00010935572022-03-31iso4217:USD00010935572021-12-31iso4217:USDxbrli:shares00010935572021-01-012021-03-310001093557us-gaap:CommonStockMember2021-12-310001093557us-gaap:AdditionalPaidInCapitalMember2021-12-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001093557us-gaap:RetainedEarningsMember2021-12-310001093557us-gaap:TreasuryStockMember2021-12-310001093557us-gaap:CommonStockMember2022-01-012022-03-310001093557us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001093557us-gaap:TreasuryStockMember2022-01-012022-03-310001093557us-gaap:RetainedEarningsMember2022-01-012022-03-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001093557us-gaap:CommonStockMember2022-03-310001093557us-gaap:AdditionalPaidInCapitalMember2022-03-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001093557us-gaap:RetainedEarningsMember2022-03-310001093557us-gaap:TreasuryStockMember2022-03-310001093557us-gaap:CommonStockMember2020-12-310001093557us-gaap:AdditionalPaidInCapitalMember2020-12-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001093557us-gaap:RetainedEarningsMember2020-12-310001093557us-gaap:TreasuryStockMember2020-12-3100010935572020-12-310001093557us-gaap:CommonStockMember2021-01-012021-03-310001093557us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001093557us-gaap:RetainedEarningsMember2021-01-012021-03-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001093557us-gaap:CommonStockMember2021-03-310001093557us-gaap:AdditionalPaidInCapitalMember2021-03-310001093557us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001093557us-gaap:RetainedEarningsMember2021-03-310001093557us-gaap:TreasuryStockMember2021-03-3100010935572021-03-310001093557srt:MinimumMember2022-01-012022-03-310001093557srt:MaximumMember2022-01-012022-03-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2020-01-010001093557srt:ScenarioPreviouslyReportedMember2020-12-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2020-12-310001093557srt:ScenarioPreviouslyReportedMember2021-12-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2021-12-310001093557srt:ScenarioPreviouslyReportedMember2021-01-012021-03-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2021-01-012021-03-310001093557srt:ScenarioPreviouslyReportedMember2022-03-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2022-03-310001093557srt:ScenarioPreviouslyReportedMember2022-01-012022-03-310001093557srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2022-01-012022-03-310001093557us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001093557us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001093557us-gaap:WarrantMember2022-01-012022-03-310001093557us-gaap:WarrantMember2021-01-012021-03-310001093557us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-03-310001093557us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-03-310001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementInitialPaymentMemberus-gaap:CollaborativeArrangementMember2018-12-280001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementInitialPaymentMemberus-gaap:CollaborativeArrangementMember2018-11-200001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementInitialPaymentMemberus-gaap:CollaborativeArrangementMember2018-11-202018-11-200001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementInitialPaymentMemberus-gaap:CollaborativeArrangementMember2018-01-012018-03-310001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementMilestonePaymentsMemberus-gaap:CollaborativeArrangementMember2019-01-012019-12-310001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementInitialPaymentMemberus-gaap:CollaborativeArrangementMember2021-10-012021-12-310001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementApprovalMilestoneMemberus-gaap:CollaborativeArrangementMember2022-03-310001093557dxcm:VerilyLifeSciencesMemberdxcm:CollaborativeArrangementMilestonePaymentsMemberus-gaap:CollaborativeArrangementMember2022-03-310001093557us-gaap:FairValueInputsLevel1Member2022-03-310001093557us-gaap:FairValueInputsLevel2Member2022-03-310001093557us-gaap:FairValueInputsLevel3Member2022-03-310001093557us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2022-03-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2022-03-310001093557us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2022-03-310001093557us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2022-03-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2022-03-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMember2022-03-310001093557us-gaap:CommercialPaperMember2022-03-310001093557us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2022-03-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2022-03-310001093557us-gaap:CorporateDebtSecuritiesMember2022-03-310001093557dxcm:SupranationalsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001093557us-gaap:FairValueInputsLevel2Memberdxcm:SupranationalsMember2022-03-310001093557us-gaap:FairValueInputsLevel3Memberdxcm:SupranationalsMember2022-03-310001093557dxcm:SupranationalsMember2022-03-310001093557us-gaap:FairValueInputsLevel1Member2021-12-310001093557us-gaap:FairValueInputsLevel2Member2021-12-310001093557us-gaap:FairValueInputsLevel3Member2021-12-310001093557us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-12-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-12-310001093557us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-12-310001093557us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2021-12-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2021-12-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMember2021-12-310001093557us-gaap:CommercialPaperMember2021-12-310001093557us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001093557us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001093557us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001093557us-gaap:CorporateDebtSecuritiesMember2021-12-310001093557dxcm:SupranationalsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001093557us-gaap:FairValueInputsLevel2Memberdxcm:SupranationalsMember2021-12-310001093557us-gaap:FairValueInputsLevel3Memberdxcm:SupranationalsMember2021-12-310001093557dxcm:SupranationalsMember2021-12-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2021-12-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2021-12-310001093557us-gaap:SeniorNotesMember2022-03-310001093557us-gaap:SeniorNotesMember2021-12-310001093557us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2022-03-310001093557us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMember2021-12-310001093557us-gaap:LandMember2022-03-310001093557us-gaap:LandMember2021-12-310001093557us-gaap:BuildingMember2022-03-310001093557us-gaap:BuildingMember2021-12-310001093557us-gaap:FurnitureAndFixturesMember2022-03-310001093557us-gaap:FurnitureAndFixturesMember2021-12-310001093557us-gaap:ComputerEquipmentMember2022-03-310001093557us-gaap:ComputerEquipmentMember2021-12-310001093557us-gaap:EquipmentMember2022-03-310001093557us-gaap:EquipmentMember2021-12-310001093557us-gaap:LeaseholdImprovementsMember2022-03-310001093557us-gaap:LeaseholdImprovementsMember2021-12-310001093557us-gaap:ConstructionInProgressMember2022-03-310001093557us-gaap:ConstructionInProgressMember2021-12-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2021-01-012021-06-300001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2021-01-012021-06-300001093557us-gaap:SeniorNotesMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMember2021-01-012021-06-300001093557dxcm:ConvertibleNotesDue2023Member2022-03-31xbrli:pure0001093557dxcm:ConvertibleNotesDue2023Member2021-03-310001093557dxcm:ConvertibleNotesDue2025Member2022-03-310001093557dxcm:ConvertibleNotesDue2025Member2021-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2018-11-300001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2018-11-012018-11-300001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Member2021-01-012021-12-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberus-gaap:CommonStockMember2021-01-012021-12-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberus-gaap:CommonStockMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberdxcm:DebtInstrumentConversionTermOneMembersrt:MinimumMember2022-01-012022-03-31utr:D0001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberdxcm:DebtInstrumentConversionTermOneMembersrt:MaximumMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberdxcm:DebtInstrumentConversionTermTwoMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberdxcm:DebtInstrumentConversionTermTwoMembersrt:MaximumMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberus-gaap:DesignatedAsHedgingInstrumentMember2018-11-300001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2023Memberus-gaap:DesignatedAsHedgingInstrumentMember2018-11-012018-11-300001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2020-05-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Member2020-05-012020-05-310001093557us-gaap:SeniorNotesMemberdxcm:DebtInstrumentConversionTermOneMembersrt:MinimumMemberdxcm:ConvertibleNotesDue2025Member2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:DebtInstrumentConversionTermOneMemberdxcm:ConvertibleNotesDue2025Membersrt:MaximumMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:DebtInstrumentConversionTermTwoMemberdxcm:ConvertibleNotesDue2025Member2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:DebtInstrumentConversionTermTwoMemberdxcm:ConvertibleNotesDue2025Membersrt:MaximumMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2022Member2022-01-012022-03-310001093557us-gaap:LineOfCreditMember2021-10-012021-10-310001093557us-gaap:LineOfCreditMember2022-03-310001093557us-gaap:LineOfCreditMember2021-10-310001093557us-gaap:LetterOfCreditMemberus-gaap:LineOfCreditMember2022-03-310001093557us-gaap:LineOfCreditMembersrt:MinimumMember2022-03-310001093557us-gaap:LineOfCreditMembersrt:MaximumMember2022-03-310001093557us-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-310001093557us-gaap:LineOfCreditMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-310001093557us-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMember2022-01-012022-03-310001093557dxcm:SimpleRiskFreeRateRFRMemberus-gaap:LineOfCreditMembersrt:MinimumMember2022-01-012022-03-310001093557dxcm:SimpleRiskFreeRateRFRMemberus-gaap:LineOfCreditMembersrt:MaximumMember2022-01-012022-03-310001093557dxcm:SimpleRiskFreeRateRFRMemberus-gaap:LineOfCreditMember2022-01-012022-03-310001093557us-gaap:LineOfCreditMembersrt:MinimumMember2022-01-012022-03-310001093557us-gaap:LineOfCreditMembersrt:MaximumMember2022-01-012022-03-310001093557us-gaap:SeniorNotesMemberdxcm:ConvertibleNotesDue2025Membersrt:MaximumMember2020-05-012020-05-310001093557us-gaap:LineOfCreditMemberdxcm:FederalReserveBankOfNewYorkRateNYFRBMember2022-01-012022-03-310001093557us-gaap:CostOfSalesMember2022-01-012022-03-310001093557us-gaap:CostOfSalesMember2021-01-012021-03-310001093557us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001093557us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-310001093557dxcm:SellingGeneralAndAdministrativeMember2022-01-012022-03-310001093557dxcm:SellingGeneralAndAdministrativeMember2021-01-012021-03-310001093557us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001093557us-gaap:PerformanceSharesMember2022-01-012022-03-31dxcm:segment0001093557country:US2022-01-012022-03-310001093557country:US2021-01-012021-03-310001093557us-gaap:NonUsMember2022-01-012022-03-310001093557us-gaap:NonUsMember2021-01-012021-03-310001093557us-gaap:SalesChannelThroughIntermediaryMember2022-01-012022-03-310001093557us-gaap:SalesChannelThroughIntermediaryMember2021-01-012021-03-310001093557us-gaap:SalesChannelDirectlyToConsumerMember2022-01-012022-03-310001093557us-gaap:SalesChannelDirectlyToConsumerMember2021-01-012021-03-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2022 |
| or |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number: 000-51222
DEXCOM, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 33-0857544 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
6340 Sequence Drive, San Diego, CA 92121
(Address of principal executive offices)
(858) 200-0200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.001 Par Value Per Share | | DXCM | | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 21, 2022, there were 98,125,933 shares of the registrant’s common stock outstanding.
| | | | | | | | | | | | | | |
DexCom, Inc. |
Table of Contents |
| | | | | | | | |
| | Page |
|
ITEM 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
|
ITEM 1. | | |
ITEM 1A. | | |
ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
ITEM 5. | | |
ITEM 6. | | |
| | |
| | |
PART I. FINANCIAL INFORMATION |
|
ITEM 1. FINANCIAL STATEMENTS |
| | |
DexCom, Inc. |
Consolidated Balance Sheets |
(Unaudited) |
| | | | | | | | | | | |
| | | |
| March 31, 2022 | | December 31, 2021 |
(In millions, except par value data) | | | (As Adjusted)* |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 716.0 | | | $ | 1,052.6 | |
Short-term marketable securities | 1,972.2 | | | 1,678.6 | |
Accounts receivable, net | 544.5 | | | 514.3 | |
Inventory | 342.2 | | | 357.3 | |
Prepaid and other current assets | 171.7 | | | 81.6 | |
Total current assets | 3,746.6 | | | 3,684.4 | |
Property and equipment, net | 856.5 | | | 801.8 | |
Operating lease right-of-use assets | 82.3 | | | 88.1 | |
Goodwill | 26.6 | | | 26.5 | |
Intangibles, net | 31.4 | | | 31.5 | |
Deferred tax assets | 290.8 | | | 290.5 | |
Other assets | 22.8 | | | 10.5 | |
Total assets | $ | 5,057.0 | | | $ | 4,933.3 | |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 603.1 | | | $ | 573.0 | |
Accrued payroll and related expenses | 84.7 | | | 125.2 | |
Short-term operating lease liabilities | 20.9 | | | 20.5 | |
Deferred revenue | 2.7 | | | 2.1 | |
Total current liabilities | 711.4 | | | 720.8 | |
Long-term senior convertible notes | 1,965.9 | | | 1,981.8 | |
Long-term operating lease liabilities | 93.3 | | | 98.6 | |
Other long-term liabilities | 97.1 | | | 90.0 | |
Total liabilities | 2,867.7 | | | 2,891.2 | |
Commitments and contingencies | | | |
Stockholders’ equity: | | | |
Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021 | — | | | — | |
Common stock, $0.001 par value, 200.0 million shares authorized; 98.2 million and 98.1 million shares issued and outstanding, respectively, at March 31, 2022; and 97.8 million and 97.0 million shares issued and outstanding, respectively, at December 31, 2021 | 0.1 | | | 0.1 | |
Additional paid-in capital | 1,996.6 | | | 2,109.0 | |
Accumulated other comprehensive income (loss) | (6.1) | | | 0.5 | |
Retained earnings | 236.0 | | | 138.7 | |
Treasury stock, at cost; 0.1 million shares at March 31, 2022 and 0.8 million shares at December 31, 2021 | (37.3) | | | (206.2) | |
Total stockholders’ equity | 2,189.3 | | | 2,042.1 | |
Total liabilities and stockholders’ equity | $ | 5,057.0 | | | $ | 4,933.3 | |
| | | |
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1 “Organization and Significant Accounting Policies” for further information. |
See accompanying notes
| | |
DexCom, Inc. |
Consolidated Statements of Operations |
(Unaudited) |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
(In millions, except per share data) | | | (As Adjusted)* | | | | |
Revenue | $ | 628.8 | | | $ | 505.0 | | | | | |
Cost of sales | 230.7 | | | 161.1 | | | | | |
Gross profit | 398.1 | | | 343.9 | | | | | |
Operating expenses: | | | | | | | |
Research and development | 135.9 | | | 109.4 | | | | | |
| | | | | | | |
Selling, general and administrative | 220.9 | | | 188.6 | | | | | |
Total operating expenses | 356.8 | | | 298.0 | | | | | |
Operating income | 41.3 | | | 45.9 | | | | | |
Interest expense | (4.6) | | | (4.7) | | | | | |
| | | | | | | |
Income from equity investments | 0.2 | | | — | | | | | |
Interest and other income (expense), net | (0.8) | | | 0.1 | | | | | |
Income before income taxes | 36.1 | | | 41.3 | | | | | |
Income tax benefit | (61.2) | | | (15.2) | | | | | |
Net income | $ | 97.3 | | | $ | 56.5 | | | | | |
| | | | | | | |
Basic net income per share | $ | 1.00 | | | $ | 0.59 | | | | | |
Shares used to compute basic net income per share | 97.2 | | | 96.3 | | | | | |
Diluted net income per share | $ | 0.93 | | | $ | 0.56 | | | | | |
Shares used to compute diluted net income per share | 107.2 | | | 104.6 | | | | | |
| | | | | | | |
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1 “Organization and Significant Accounting Policies” for further information. | | | | |
See accompanying notes
| | |
DexCom, Inc. |
Consolidated Statements of Comprehensive Income |
(Unaudited) |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
(In millions) | | | (As Adjusted)* | | | | |
Net income | $ | 97.3 | | | $ | 56.5 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Translation adjustments and other | (1.4) | | | (0.3) | | | | | |
Unrealized gain (loss) on marketable debt securities | (5.2) | | | — | | | | | |
Total other comprehensive loss, net of tax | (6.6) | | | (0.3) | | | | | |
Comprehensive income | $ | 90.7 | | | $ | 56.2 | | | | | |
| | | | | | | |
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1 “Organization and Significant Accounting Policies” for further information. | | | | |
See accompanying notes
| | |
DexCom, Inc. |
Consolidated Statements of Stockholders’ Equity |
(Unaudited) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | Three Months Ended March 31, 2022 |
(In millions) | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Treasury Stock | | Total Stockholders’ Equity |
Shares | | Amount | |
Balance at December 31, 2021 (As Adjusted)* | | 97.0 | | | $ | 0.1 | | | $ | 2,109.0 | | | $ | 0.5 | | | $ | 138.7 | | | $ | (206.2) | | | $ | 2,042.1 | |
Issuance of common stock under equity incentive plans | | 0.4 | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock for Employee Stock Purchase Plan | | — | | | — | | | 10.1 | | | — | | | — | | | — | | | 10.1 | |
Issuance of common stock in connection with achievement of regulatory approval milestone, net of issuance costs | | 0.7 | | | — | | | (189.3) | | | — | | | — | | | 189.2 | | | (0.1) | |
Conversions of 2023 Notes | | 0.1 | | | — | | | 4.2 | | | — | | | — | | | 13.2 | | | 17.4 | |
Benefit of note hedge upon conversions of 2023 Notes | | (0.1) | | | — | | | 33.5 | | | — | | | — | | | (33.5) | | | — | |
Share-based compensation expense | | — | | | — | | | 29.1 | | | — | | | — | | | — | | | 29.1 | |
Net income | | — | | | — | | | — | | | — | | | 97.3 | | | — | | | 97.3 | |
Other comprehensive loss, net of tax | | — | | | — | | | — | | | (6.6) | | | — | | | — | | | (6.6) | |
Balance at March 31, 2022 | | 98.1 | | | $ | 0.1 | | | $ | 1,996.6 | | | $ | (6.1) | | | $ | 236.0 | | | $ | (37.3) | | | $ | 2,189.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 |
(In millions) | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income | | Accumulated Deficit | | Treasury Stock | | Total Stockholders’ Equity |
Shares | | Amount | |
Balance at December 31, 2020 (As Adjusted)* | | 96.1 | | | $ | 0.1 | | | $ | 1,726.8 | | | $ | 3.2 | | | $ | (78.2) | | | $ | (100.0) | | | $ | 1,551.9 | |
Issuance of common stock under equity incentive plans | | 0.6 | | | — | | | — | | | — | | | — | | | — | | | — | |
Issuance of common stock for Employee Stock Purchase Plan | | — | | | — | | | 8.7 | | | — | | | — | | | — | | | 8.7 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Share-based compensation expense | | — | | | — | | | 28.0 | | | — | | | — | | | — | | | 28.0 | |
| | | | | | | | | | | | | | |
Net income | | — | | | — | | | — | | | — | | | 56.5 | | | — | | | 56.5 | |
Other comprehensive loss, net of tax | | — | | | — | | | — | | | (0.3) | | | — | | | — | | | (0.3) | |
Balance at March 31, 2021 (As Adjusted)* | | 96.7 | | | $ | 0.1 | | | $ | 1,763.5 | | | $ | 2.9 | | | $ | (21.7) | | | $ | (100.0) | | | $ | 1,644.8 | |
| | | | | | | | | | | | | | |
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1 “Organization and Significant Accounting Policies” for further information. |
See accompanying notes
| | |
DexCom, Inc. |
Consolidated Statements of Cash Flows |
(Unaudited) |
| | | | | | | | | | | |
| Three Months Ended |
March 31, |
| 2022 | | 2021 |
(In millions) | | | (As Adjusted)* |
Operating activities | | | |
Net income | $ | 97.3 | | | $ | 56.5 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | |
Depreciation and amortization | 36.8 | | | 20.9 | |
Share-based compensation | 29.1 | | | 28.0 | |
| | | |
Non-cash interest expense | 1.6 | | | 2.1 | |
Realized (gain) loss on equity investment | (0.2) | | | — | |
| | | |
Deferred income taxes | 0.1 | | | (0.3) | |
Other non-cash income and expenses | 3.8 | | | 8.0 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable, net | (30.1) | | | (14.9) | |
Inventory | 15.6 | | | (55.0) | |
Prepaid and other assets | (97.9) | | | (20.2) | |
Operating lease right-of-use assets and liabilities, net | (0.9) | | | 0.7 | |
Accounts payable and accrued liabilities | 53.5 | | | 33.9 | |
Accrued payroll and related expenses | (40.5) | | | (33.0) | |
Deferred revenue and other liabilities | 2.8 | | | 1.1 | |
Net cash provided by operating activities | 71.0 | | | 27.8 | |
Investing activities | | | |
Purchases of marketable securities | (546.5) | | | (802.0) | |
Proceeds from sale and maturity of marketable securities | 241.8 | | | 790.0 | |
| | | |
Purchases of property and equipment | (101.6) | | | (99.7) | |
Acquisitions, net of cash acquired | (3.2) | | | — | |
Other investing activities | (2.3) | | | (0.5) | |
Net cash used in investing activities | (411.8) | | | (112.2) | |
Financing activities | | | |
| | | |
| | | |
Net proceeds from issuance of common stock | 10.1 | | | 8.7 | |
Other financing activities | (4.8) | | | (7.9) | |
Net cash provided by financing activities | 5.3 | | | 0.8 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1.0) | | | (0.4) | |
Decrease in cash, cash equivalents and restricted cash | (336.5) | | | (84.0) | |
Cash, cash equivalents and restricted cash, beginning of period | 1,053.6 | | | 818.2 | |
Cash, cash equivalents and restricted cash, end of period | $ | 717.1 | | | $ | 734.2 | |
| | | |
Reconciliation of cash, cash equivalents and restricted cash, end of period: | | | |
Cash and cash equivalents | $ | 716.0 | | | $ | 733.8 | |
Restricted cash | 1.1 | | | 0.4 | |
Total cash, cash equivalents and restricted cash | $ | 717.1 | | | $ | 734.2 | |
| | | |
Supplemental disclosure of non-cash investing and financing transactions: | | | |
Shares issued for conversions of 2023 Notes | $ | 35.9 | | | $ | — | |
Shares received under note hedge upon conversions of 2023 Notes | $ | (33.5) | | | $ | — | |
Acquisition of property and equipment included in accounts payable and accrued liabilities | $ | 26.6 | | | $ | 35.0 | |
Right-of-use assets obtained in exchange for operating lease liabilities | $ | (1.3) | | | $ | 9.9 | |
Right-of-use assets obtained in exchange for finance lease liabilities | $ | 5.2 | | | $ | — | |
| | | |
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1 “Organization and Significant Accounting Policies” for further information. |
See accompanying notes
| | |
DexCom, Inc. |
Notes to Consolidated Financial Statements |
(Unaudited) |
| | |
1. Organization and Significant Accounting Policies |
| | | | | | | | | | | | | | |
Organization and Business |
DexCom, Inc. is a medical device company that develops and markets continuous glucose monitoring, or CGM, systems for the management of diabetes by patients, caregivers, and clinicians around the world. Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “Dexcom” refer to DexCom, Inc. and its subsidiaries.
| | | | | | | | | | | | | | |
Basis of Presentation and Principles of Consolidation |
We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission, or SEC, Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.
Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. We expect that revenues we generate from the sales of our products will fluctuate from quarter to quarter. We experience seasonality that is typical in our industry, with lower sales in the first quarter of each year compared to the fourth quarter of the previous year.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2021 included in the Annual Report on Form 10-K that we filed with the SEC on February 14, 2022.
These consolidated financial statements include the accounts of DexCom, Inc. and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation.
We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash. For international subsidiaries whose functional currencies are the local currencies, we translate the financial statements into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses. We include translation-related adjustments in comprehensive income and in accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets. We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income (expense), net in our consolidated statements of operations.
The preparation of consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in our consolidated financial statements and the disclosures made in the accompanying notes. Areas requiring significant estimates include rebates, transaction price, the collectibility of accounts receivable, excess or obsolete inventories and the valuation of inventory, accruals for litigation contingencies, and the amount of our worldwide tax provision and the realizability of deferred tax assets. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
| | | | | | | | | | | | | | |
Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are generally recorded at the invoiced amount, net of prompt pay discounts, for distributors and at net realizable value for direct customers, which is determined using estimates of claim denials and historical reimbursement experience without regard to aging category. Accounts receivable are not interest bearing. We evaluate the creditworthiness of significant customers based on historical trends, the financial condition of our customers, and external market factors. We generally do not require collateral from our customers. We maintain an allowance for doubtful accounts for potential credit losses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectible. Generally, receivable balances greater than one year past due are deemed uncollectible.
| | | | | | | | | | | | | | |
Concentration of Credit Risk |
Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term marketable securities, and accounts receivable. We limit our exposure to credit risk by placing our cash and investments with a few major financial institutions. We have also established guidelines regarding diversification of our investments and their maturities that are designed to maintain principal and maximize liquidity. We review these guidelines periodically and modify them to take advantage of trends in yields and interest rates and changes in our operations and financial position.
Inventory is valued at the lower of cost or net realizable value on a part-by-part basis that approximates first in, first out. We capitalize inventory produced in preparation for commercial launches when it becomes probable that the product will receive regulatory approval and that the related costs will be recoverable through the commercialization of the product. A number of factors are considered, including the status of the regulatory application approval process, management’s judgment of probable future commercial use, and net realizable value.
We record adjustments to inventory for potential excess or obsolete inventory, as well as inventory that does not pass quality control testing, in order to state inventory at net realizable value. Factors influencing these adjustments include inventories on hand and on order compared to estimated future usage and sales for existing and new products, as well as judgments regarding quality control testing data and assumptions about the likelihood of scrap and obsolescence. Once written down the adjustments are considered permanent and are not reversed until the related inventory is disposed of or sold.
Our products require customized products and components that currently are available from a limited number of sources. We purchase certain components and materials from single sources due to quality considerations, costs or constraints resulting from regulatory requirements.
Historically, our inventory reserves have been adequate to cover our actual losses. However, if actual product life cycles, product quality or market conditions differ from our assumptions, additional inventory adjustments that would increase cost of goods sold could be required.
We generate our revenue from the sale of disposable sensors and our reusable transmitter and receiver, collectively referred to as Reusable Hardware. We also refer to Reusable Hardware and disposable sensors in this section as Components. We generally recognize revenue when control is transferred to our customers in an amount that reflects the net consideration to which we expect to be entitled.
In determining how revenue should be recognized, a five-step process is used, which includes identifying performance obligations in the contract, determining whether the performance obligations are separate, allocating the transaction price to each separate performance obligation, estimating the amount of variable consideration to include in the transaction price and determining the timing of revenue recognition for separate performance obligations.
Contracts and Performance Obligations
We consider customer purchase orders, which in most cases are governed by agreements with distributors or third-party payors, to be contracts with a customer. For each contract, we consider the obligation to transfer Components to the customer, each of which are distinct, to be separate performance obligations. We also provide free-of-charge software, mobile applications and updates for our Dexcom Share® remote monitoring system. The standalone selling prices of Dexcom Share® are estimated based on an expected cost plus a margin approach.
Transaction Price
Transaction price for the Components reflects the net consideration to which we expect to be entitled. Transaction price is typically based on the contracted rates less an estimate of claim denials and historical reimbursement experience by payor, which include current and future expectations regarding reimbursement rates and payor mix.
Variable Consideration
We include an estimate of variable consideration in the calculation of the transaction price at the time of sale, when control of the Components transfers to the customer. Variable consideration includes, but is not limited to: rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements. We classify our provisions related to
variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.
Estimates
We review the adequacy of our estimates for transaction price adjustments and variable consideration at each reporting date. If the actual amounts of consideration that we were to receive differ from our estimates, we would adjust our estimates and that would affect reported revenue in the period that such variances become known. If any of these judgments were to change, it could cause a material increase or decrease in the amount of revenue we report in a particular period.
Rebates
We are subject to rebates on pricing programs with managed care organizations, such as pharmacy benefit managers, governmental and third-party commercial payors, primarily in the U.S. We estimate provisions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.
Chargebacks
We participate in chargeback programs, primarily with government entities in the U.S., under which pricing on products below negotiated list prices is provided to participating entities and equal to the difference between their acquisition cost and the lower negotiated price. We estimate provisions for chargebacks primarily based on historical experience on a product and program basis, current contract prices under the chargeback programs and channel inventory data.
Consideration Payable to the Customer
We pay administrative and service fees to certain of our distributors based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. We accrue for these fees based on actual net sales and contractual fee rates negotiated with the customer.