SAN DIEGO – Despite an increase in revenue of 15% over the past year, San Diego-based medical device company Dexcom (Nasdaq: DXCM) reported a disappointing second quarter, as new customer sales fell far short of expectations.
News of the poor showing sent the company’s stock plummeting almost 40% on the day of the July 25 announcement, despite a $750 million stock buyback announced in conjunction with the earnings report.
In the first quarter report released in April, Dexcom forecast sales of $4.2 billion to $4.35 billion this year. It now has lowered expectations to $4 billion to $4.05 billion.
Dexcom makes products that help people manage their diabetes, including the G6 continuous glucose monitoring (CGM) system that sends real-time glucose reading to a compatible smart device without a fingerstick and the newer G7 that delivers real-time glucose numbers to a smartphone or smart watch.
Market Headwinds
Kevin Sayer, Dexcom’s chairman, president and CEO, said there had been positive progress made on several fronts, but a few trends emerged over the second quarter that drove results below expectations.
CEO
Dexcom
First, as the company worked through its domestic salesforce expansion, the share of new customers fell short of expectations, he said.
U.S. revenue per customer also stepped down faster than expected, partly because the number of people transitioning to G7 and eligible for rebates was more than expected at that time.
In another area that hurt the company, Sayer said growth in the durable medical equipment channel fell short of expectations.
“The DME distributors remain important partners for us in our business, and we have not executed well this quarter against these partnerships,” he said. “We need to refocus on those relationships.”
Finally, the company’s international performance also was lighter than expected, he said.
Still Financially Strong
Dexcom Chief Financial Officer Jereme Sylvain said the company remains in strong financial shape, with more than $3.12 billion in cash, cash equivalents and marketable securities, but the disappointing number of new customers impacted Dexcom by about $10 million this quarter.
Chief Financial Officer
Dexcom
Sylvain said the impacts are expected to reach their peak in the third quarter, with total revenue expected to be between $975 million and $1 billion, up just 1% or 3%, while analysts projected revenue to hit $1.15 billion.
Despite the poor quarter, Sylvain said the company has a bright future.
Worldwide revenue in the second quarter was up from $871.3 million in 2023 to $1 billion this year, a growth of 15% on a reported basis and 16% on an organic basis.
U.S. revenue in the second quarter grew from $617 million last year to $732 this year, a 19% increase.
International revenue grew from $254.7 million to $272 million in the same time, an increase of 7%.
The second quarter showed a decrease from the first quarter in net income and diluted net income per share.
The latest report shows a GAAP net income of $143.5 million, or $0.35 per diluted share.
In the first quarter of 2024, GAAP net income was $146.4 million, or $0.36 per diluted share.
In mid-July, Dexcom shares were at about $112. Shares were at about $63 last Friday, the day after the second quarter report.
Future Releases
Looking forward, Sayer said the company had strengthened its existing product line and was preparing for its most expansive launch in Dexcom’s history with the August introduction of Stelo.
Dexcom announced earlier this year that the continuous glucose monitor Stelo had received FDA approval for over-the-counter use and would be marketed to a certain segment of type 2 diabetes patients who do not use insulin.
Sayer said the potential market for the device was 25 million people in the U.S. alone.
In June, the company launched G7 as the first continuous glucose monitoring system that can connect directly to an Apple Watch, giving users the convenience of real-time glucose readings on their wrist even when their iPhones are not with them.
Users also will be able to track other key health metrics that can impact glucose levels through Apple’s Activity, Cycle Tracking, Sleep, and other health features on Apple Watch, iPhone and iPad.
Dexcom Executive Vice President and Chief Operating Officer Jake Leach has said the Apple Watch feature had been heavily requested by Dexcom G7 users.
Dexcom
FOUNDED: 1999
CEO: Kevin Sayer
HEADQUARTERS: Sorrento Mesa
BUSINESS: Medical devices for managing diabetes
REVENUE: $3.62 billion in 2023
STOCK: DXCM (Nasdaq)
EMPLOYEES: 9,500 full-time and 100 part-time worldwide
WEBSITE: Dexcom.com
CONTACT: 858-200-0200
